factors` affecting demands and supply
factors` affecting demands and supply. Price: The higher the price of any commodity, the lower the quantity that will be demanded and vice versa.
- The price of other commodities: This applies to commodities that have close substitutes. If the price of such a commodity is high, the consumer may demand for the close substitute.
- Income of the consumer: The higher the income of a consumer, the higher the quantity of commodities that he/she will demand and vice versa.
- Changes in taste of consumer: If consumers change their taste for a particular commodity, the demand for that commodity will also change
- Population: Increase in population in an area will lead to high demand for commodities and vice versa.
- Periods of festival: It is well known that people demand for more of specific commodities during certain festivals.
- Expectation of changes in price: If people expect that there will be high prices of commodities in the nearest future, demand will increase and vice versa.
- Taxation: An increase in taxation means a reduction in purchasing power of the consumers which may result in decrease in the demand for certain commodities.
- Changes in fashion: As fashion changes, people’s demand for the reigning fashion also changes.
- Weather and climate: Variations in weather and climate or season may affect the demand for certain commodities. For example, rain coat, umbrella and rain boots, are highly demand during raining season.
- Government policy: Government policy over the consumption of some commodities may either encourage or discourage the demand for such commodities.
- Advertisement: A good advertisement for a commodity can lead to an increase in demand for it and vice versa.
Factors Affecting Supply
- Price: The higher the price of any commodity, the higher the quantity will be supplied and vice versa.
- Level of technology: Improved techniques reduce cost per un product and increase output or supply
- Cost of production: If the co production increases, the producer to produce less of a commodity.
- Government policy: Government policy, e.g. subsidy given to farm* the form of free importation of equilibrium can lower production cost and increase supply.
- Weather: If the weather of a
- particular area is favourable at a particular more agricultural products will produced and their supply to the will increase.
- Taxation: An increase in taxation materials used in production discourage production thereby leading reduction in supply and vice versa.
- Price of other commodities: The supply a of a commodity will be affected if the prices of other commodities rise price of a substitute like maize increase the quantity of rice produced will fall.
- Number of producers: If the number of producers of a commodity in there will be a corresponding increase quantity supplied.
- Natural disasters: A plague of in flood, war, drought or fire will negatively affect the supply of a commodity.