Demand is the amount of goods and services that buyers are willing to purchase in the market at a given price. Falling demand is a fairly common phenomenon. There may be several reasons for this, the main of which are recognized as falling consumer incomes, declining product quality and rising prices for it.
Instructions
Step 1
The most significant factor influencing consumer demand is consumer income. For most goods and services, a decrease in the monetary income of the population leads to a decrease in demand for them. Such goods and services are called superior goods, or normal goods. But there are exceptions, when a decrease in citizens' incomes leads to an increase in demand for certain categories of goods, for example, used cars, second-hand clothes.
Step 2
An increase in the price of a product is another reason for a drop in demand. At the same time, the change in prices for substitute and complementary goods is also important. If the price of the exchangeable item has decreased, the demand for the item in question may fall. For example, with a decrease in the price of pears, the number of purchased apples decreases markedly. Conversely, if the price of butter rises, the demand for margarine will increase significantly. Complementary goods include those that are consumed together, such as gasoline and cars, sea trips and swimwear. With an increase in the cost of the main product (car), the demand for a complementary product - gasoline - falls.
Step 3
Consumer tastes and preferences are a significant factor influencing the magnitude of demand. A decrease in demand for a product can be caused by unfavorable changes in consumer preferences, caused, for example, by a decrease in product quality or the appearance on the market of a new product that is ahead of a previously existing product in terms of its functionality. Thus, the appearance of an MP3 player on the market led to a drop in demand for a CD player.
Step 4
It is obvious that a decrease in demand is caused by a decrease in the number of buyers in the market. With a fall in the birth rate, for example, the demand for baby supplies (diapers and clothes) and services of child care facilities significantly decreases.
Step 5
They can cause a drop in demand and consumer expectations. If consumers expect a decrease in the price of a product after a while, they will buy it in smaller quantities, thereby reducing demand at the moment.
