Change in demand

The demand of a commodity may change due to many factors. There may be change in price of commodity. The population of a country may change. There may be change in level of income. There may be change in liking and disliking of people about goods. The prices of substitutes and complementary goods may change. The pattern of income distribution may change. The government can revise tax rates. A change in any factor can bring change in demand for a commodity. This change in demand can be classified as:

  1. Extension and contraction of demand and
  2. Rise and fall in demand.

Reasons of change in demand

Change in income

The change in income brings a change in demand. When income increases there is increase in demand. If there is decrease in income there is decrease in demand.

Change in population

The change in population brings a change in demand. When population increases there is increase in demand. If there is decrease in population there is decrease in demand.

Change in habits

There is change in demand due to change in habits of people. The for a commodity increases due to increase in consumption because of change in taste of people in favor of that commodity.

Change in price of commodity

There is change in demand due to change in price of commodity. When there is increase in price there is decrease in demand. If there is decrease in price there is increase in demand.

Change in substitutes

The increase in price of a commodity will increase the demand for substitutes. When there is fall in the price of a commodity there is decrease in the demand for substitutes.

Change in complementary goods

When there is change in the price of a commodity there is change in the complementary goods. When the price of a car increase there is decrease in the demand for petrol.

Change in money supply

There change in demand due to change in money supply. Increase in money supply increase the demand for goods. Decrease in money supply decrease the demand for goods.

Change in wealth distribution

There is change in demand due to change in wealth distribution. When there is equal distribution, there is increase in purchasing power of the poor section of the society. The result is that there is change in demand pattern.