Determinants of Demand

Demand for a commodity is governed by several factors like price of the commodity, income of the consumer, prices of related commodities (substitute and complementary goods), taste of the consumer and the like. Change in demand occurs when any one of the above factors undergoes a change. To know the influence of any one factor, we have to keep all other factors constant to know the influence of price on demand. But in real world, demand is influenced by so many factors. In symbolic form, this can be represented a s follows:

                Dx = f (PX, Y, Py, Pz, T, L, G)

                Where ‘Dx’ stands for demand for a definite good ‘X’

                PX = Price of good ‘x’

                Y = Income of the consumer

                Py = Price of substitute product ‘y’

                Pz = Price of the complementary good ‘z’

                 T = For the consumer

                 L = Population

                 G = Govt. policy

                 F = Functional relation