Market demand for a good is the sum of quantities which all the individual buyers of the good are willing to buy at a given price during a ** of time.
The determining factors are:
(i) Own price of the good.
(ii) Prices of related good.
(iii) Income of the consumers.
(iv) Tastes and preferences of the consumers.
(v) Number of consumers.
(vi) Distribution of income.
The total quantity that all the individuals are willing to and are able to buy at a given price, other things remaining the same, is called as Market Demand. In other words, Market Demand refers to the sum of individual demands for a product at a given price per unit of time.
Determinants of Market Demand:
(i) Price of the Product: The price of a product is the most important determinant of market demand in the long-run and the only determinant in the short-run. As per the law of demand, the price of a product and its quantity demanded increases when the price falls and decreases when the price rises, other things remaining the same.
(ii) Price of related goods: Market demand for a commodity is also affected by the change in the price of the related goods. The related goods may be the substitute or complementary goods. In case of substitute goods like-tea and coffee, Maggi and Yippi, Pepsi and Coca cola etc., the increase in the price of either commodity the demand for other also increases and vice versa. In case of complementary goods like-bread and butter, car and petrol etc., the increase in the price of either commodity the demand for another decreases and vice-versa.
(iii) Consumer Income: The income is the basic determinant of the quantity demanded of a product as it decides the purchasing power of the consumer. Thus, people with higher disposable income spend a large amount of income on consumer goods and services as compared to those with lower disposable income.
(iv) Consumers tastes and Preferences: It plays a vital role in determining a demand for a product. It depends on the life style, culture, social customs, age, ** of the consumer. Change in any of these factors results in the change in the consumer' tastes and preferences, thereby resulting in either increase or decrease in the demand.
(v) Distribution of National Income: Higher the national income, the higher the demand for all the normal goods.
(vi) Population of the Country: The larger the size of the population, the larger the demand for a product and vice-versa.
