Q&A - What factors affect the demand for a product?
The demand for a product will be influenced by several factors:
Usually viewed as the most important factor that affects demand. Products have different sensitivity to changes in price. For example, demand for necessities such as bread, eggs and butter does not tend to change significantly when prices move up or down
When an individual’s income goes up, their ability to purchase goods and services increases, and this causes demand to increase. When incomes fall there will be a decrease in the demand for most goods
Consumer tastes and preferences
Changing tastes and preferences can have a significant effect on demand for different products. Persuasive advertising is designed to cause a change in tastes and preferences and thereby create an increase in demand. A good example of this is the recent surge in sales of smoothies!
Competitors are always looking to take a bigger share of the market, perhaps by cutting their prices or by introducing a new or better version of a product
When a product becomes unfashionable, demand can quickly fall away.