Question

The demand for goods and services is essentially influenced by several things, state and explain and make the relationship between variables statistically between independent variables and dependent variables!

Answer 1

Demand for goods and services:-

Demand as we know is the total amount of goods and services purchased by the consumer at the prevailing market price, these goods and services are consumed by the consumer to satisfy his wants. Demand is the desire backed by willingness to pay and ability to pay. This want satisfying power in a good is called utility. The utility goes on decreasing as we consume more and more of a particular good. We know that demand of a good or service is influenced by the number of things. Like price, tastes and preference of consumer, income and availability of substitutes.

We know that, there is a negative relationship between price and demand. This negative relationship is called law of demand. Law of demand holds that as the price of a good increase it's demand decreases with other things being constant and when the price of good decreases it's demand increases and vice versa. The demand is influenced by number of factors as well. We will discuss these separately.

The tastes and preference of the consumer is also influencing the demand of goods and services.An important factor which determines the demand for a good is the tastes and preferences of the consumers for it. A good for which consumers’ tastes and preferences are greater, its demand would be large and its demand curve will therefore lie at a higher level. People’s tastes and preferences for various goods often change and as a result there is change in demand for them.

The demand for goods and services is greatly influenced by the income of the people.

The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa.The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good.

The demand is also related with the change in price of related goods and services, like substitutes and complements. The demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant.

The price is an independent variable and demand is dependent variable.

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