Question

In: Economics

Determinants of demand

What are the various types of demand determinants? Explain.

Solutions

Expert Solution

Producers’ Goods and Consumers’ Goods:

Producer’ goods are also called as capital goods. These goods are used in the production of other goods. Machinery, tools and implements, factory buildings, etc. are some of the examples of capital goods.Consumers’ goods are those goods, which are used for final consumption. They satisfy the consumers’ wants directly. Examples of consumers’ goods can be ready-made clothes, prepared food, residential houses, etc. The differentiation between a consumer good and a capital good is based on the purpose for which it is used, rather than, the good itself. A loaf of bread used by a household is a consumer good, whereas used by a sweet shop is a producer good.

Derived Demand and Autonomous Demand:

 

When the demand for a product is tied to the purchase of some parent product, its demand is called derived demand. For example, the demand for cement is derived demand, being directly related to building activity. Demand for all producers’ goods, raw materials and components are derived. Also, the demand for packaging material is a derived demand. However, it is hard to find a product in modern civilization whose demand is wholly and has supposed to have less price elasticity than autonomous demand.

Durable Goods and Non-Durable Goods:

 

Durable products present more complicated problems of demand analysis than products of non-durable nature. Sales of non-durables are made largely to meet current demand which depends on current conditions. Sales of durables, on the other hand, add to the stock of existing goods that are still serviceable and are subject to repetitive use. Thus it is a common practice to segregate current demand for durables in terms of replacement of old products and expansion of total stock.Demand analysis for durable goods is complex. Determination of demand for these goods has to take into consideration the replacement investment and expansion of the industry. The reasons for replacement investment are due to technological developments making the existing technology outmoded and the depreciation of the capital over a period of time.

Short-Run Demand and Long-Run Demand:

Short-run demand refers to the demand with its instant reaction to price changes, income fluctuations, etc. Long-run demand is that which will ultimately exist as a result of the changes in pricing, promotion or product improvement, after enough time has been allowed to let the market adjust itself to the new situation.


The determinants of demand; producer and consumer goods, derrived and autonomous demand, durable and non-durable goods, and short-run and long-run dmand.

Related Solutions

Law of Demand in Economics.
 What is meant by Law of Demand in Economics. And what are the factors that affecting Quantity of Demand in Economics. Expain it.
Law of Demand in Economics.
What is meant by Law of Demand in Economics. And what are the factors that affecting Quantity of Demand in Economics. Expain it.
Elasticity of Demand in Economics.
What do you understand by Elasticity of Demand? And what are the factors that affecting Elasticity of Demand ? Illustrate.
Types of Elasticity of Demand in Economics.
What are the types of Elasticity of Demand in Economics? And mention the effect of price change on the quantity demanded of any commodity through a table.  
The demand function for a good is given as Q = 130-10P.
The demand function for a good is given as Q = 130-10P.  Fixed costs associated with producing that good are €60 and each unit produced costs an extra €4. i). Obtain an expression for total revenue and total costs in terms of Q ii). For what values of Q does the firm break even iii). Obtain an expression for profit in terms of Q and sketch its graph iv). Use the graph to confirm your answer to (ii) and to...
The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units
The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, the setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. The production order quantity for this problem is approximate.  
A firms demand function for a good is given by P = 107-2Q and their total cost function is given by
A firms demand function for a good is given by P = 107-2Q and their total cost function is given by TC = 200+3Q . i). Obtain an expression for total revenue profit in terms of Q ii).  For what values of Q does the firm break even. iii). llustrate the answer to (ii) using sketches of the total cost function, the total revenue function and the profit function. iv). From the graph estimate the maximum profit and the level...
Why does a shift in perceived demand cause a shift in marginal revenue for monopolistic competitive firms?
Why does a shift in perceived demand cause a shift in marginal revenue for monopolistic competitive firms?
Given the above Demand and Supply functions, what is the impact on the Market Equilibrium of Y increasing from 0 to 20?
QD = 200 -2P + ½Y QS = 3P – 100 Given the above Demand and Supply functions, what is the impact on the Market Equilibrium of Y increasing from 0 to 20?