Factors that influence demand for goods and services

Human wants are unlimited. The resources at the disposal of human beings are limited.

Factors that influence demand for goods and services

First, most modern industrial economies experience few if any falls in prices. Second, when they do suffer price cuts as in Japanit can lead to disastrous deflation. Debt[ edit ] A post-Keynesian theory of aggregate demand emphasizes the role of debtwhich it considers a fundamental component of aggregate demand; [5] the contribution of change in debt to aggregate demand is referred to by some as the credit impulse.

Spending is related to income via: What you spend is what you earn, plus what you borrow. If debt grows or shrinks slowly as a percentage of GDP, its impact on aggregate demand is small.

Conversely, if debt is significant, then changes in the dynamics of debt growth can have significant impact on aggregate demand. Change in debt is tied to the level of debt: Similarly, changes in the repayment rate debtors paying down their debts impact aggregate demand in proportion to the level of debt.

Thus, as the level of debt in an economy grows, the economy becomes more sensitive to debt dynamics, and credit bubbles are of macroeconomic concern. Since write-offs and savings rates both spike in recessions, both of which result in shrinkage of credit, the resulting drop in aggregate demand can worsen and perpetuate the recession in a vicious cycle.

This perspective originates in, and is intimately tied to, the debt-deflation theory of Irving Fisherand the notion of a credit bubble credit being the flip side of debtand has been elaborated in the Post-Keynesian school. However, if the level of debt stops rising and instead starts falling if "the bubble bursts"then aggregate demand falls short of income, by the amount of net savings largely in the form of debt repayment or debt writing off, such as in bankruptcy.

This causes a sudden and sustained drop in aggregate demand, and this shock is argued to be the proximate cause of a class of economic crises, properly financial crises. Indeed, a fall in the level of debt is not necessary — even a slowing in the rate of debt growth causes a drop in aggregate demand relative to the higher borrowing year.

From the perspective of debt, the Keynesian prescription of government deficit spending in the face of an economic crisis consists of the government net dis-saving increasing its debt to compensate for the shortfall in private debt: Other alternatives include seeking to restart the growth of private debt "reflate the bubble"or slow or stop its fall; and debt reliefwhich by lowering or eliminating debt stops credit from contracting as it cannot fall below zero and allows debt to either stabilize or grow — this has the further effect of redistributing wealth from creditors who write off debts to debtors whose debts are relieved.

Criticisms[ edit ] Austrian theorist Henry Hazlitt argued that aggregate demand is "a meaningless concept" in economic analysis.Economics is the study of production, distribution and consumption of goods and services whether in a city, country or a single business.

Questions about supply and demand and economic theory are. Factors affecting demand The individual demand curve illustrates the price people are willing to pay for a particular quantity of a good.

The market demand curve will be the sum of all individual demand curves. Some of the factors to consider while selecting channels of distribution are as follows: (i) Product (ii) Market (iii) Middlemen (iv) Company (v) Marketing Environment (vi) Competitors (vii) Customer Characteristics (viii) Channel Compensation.

Perishable goods .

Factors that influence demand for goods and services

In macroeconomics, aggregate demand (AD) or domestic final demand (DFD) is the total demand for final goods and services in an economy at a given time. It specifies the amounts of goods and services that will be purchased at all possible price levels. This is the demand for the gross domestic product of a country.

It is often called effective demand, though at other times this term is. The economic factors that most affect the demand for consumer goods are employment, wages, prices/inflation, interest rates and consumer confidence.

How Employment and . 1. Introduction. Over the last decade, consumer consumption of goods and services has increased tremendously across the world, leading to depletion of natural resources and severe damage to the environment (Chen & Chai, ).Some of the serious repercussions of environmental damage are global warming, increased environmental pollution, and decline in flora and fauna (Chen & Chai, ).

5 Major Factors Affecting the Demand of a Product | Micro Economics