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.Continue Reading
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.Learn more about Economics
According to About.com, the quantity theory of money states that the supply of money in an economy determines the level of prices, and changes in the money supply result in proportional price changes. Therefore, a given percentage change in money supply results in an equivalent level of inflation or deflation.Full Answer >
Price elasticity of demand has four determinants: product necessity, how many substitutes for the product there are, how large a percentage of income the product costs, and how frequently its purchased, according to Economics Help. By using these determinants, businesses can estimate how a change in the price affects demand.Full Answer >
An expansionary monetary policy shifts the supply curve for money to the right because of heightened market expectations, according to Boundless. This results in lower interest rates and increased economic growth during periods of slow economic growth.Full Answer >
In economics, MPC, or the marginal propensity to consume, is the increase in consumption caused by the increase in income divided by the change in income. MPC can be expressed as a ratio and is applicable to both individuals and businesses.Full Answer >