Q:

What are the five determinants of demand?

A:

The five determinants of demand are price, income, expectations, relative prices and preferences. They detail the conditions that drive individual purchasing decisions and thus demand.

The law of demand states that demand and price are dependent upon one another. Therefore, as prices rise, demand falls. Relative pricing is important when two products are linked. For example, as gas prices rise, the demand for fuel-intensive vehicles falls. Expectations about future pricing also affect demand. If consumers expect a decrease in price in the future, then demand declines in the short term.

When incomes rise, so does the demand for products. Consumer preferences can affect demand, so marketing campaigns can increase the desire for a product.


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