While non-price factors can vary greatly, they are an important consideration in any marketing strategy. Higher price tags on consumer goods also deter spending. Examples include breakfast cereal and milk; notebooks and pens or pencils, golf balls and golf clubs; gasoline and sport utility vehicles; and the five-way combination of bacon, lettuce, tomato, mayonnaise, and bread. These include luxury assets such as jewelry and cars. Hazina is a Swahili word which means treasure. There are two types of related goods. Your business is dependent on the purchasing power of your buyers.
Through competition for scarce resources, consumers indirectly inform producers about what goods and services to provide and in what quantity they should be provided. Generally, the smaller the price of a good, the less is the elasticity of its demand. They are less likely to buy used cars and more likely to buy new cars. Factors Affecting the Price Elasticity of Demand Economics The following points highlight the seven main factors affecting the price elasticity of demand. Thus in such a case the consumption of the commodity can't be abstained in spite of the rise in price. If the consumers substitute one good for another, then the number of consumers of that good which has been substituted by the other will decline and for the good which has been used in its place, the number of consumers will increase.
Changes in the prices of related goods: Sometimes, the demand for a good might be influenced by prices changes of other goods. Income influenced elasticity of demand is far higher for lower income groups compared to those with higher levels of income. Proportion of Income Spent on the Good: The price-elasticity of demand for a good also depends on the proportion of their income the buyers spend on the good. Thus the demand for tea and coffee is elastic. The demand for good A is price sensitive to changes in the price of good B, because they both satisfy the same want.
However, if the economy experiences a boom that leads to higher wages, the change in demand can be positive, as the market increases and the curve shifts to the right with lower prices and motivated buyers. If due to some reason, consumers expect that in the near future prices of the goods would rise, then in the present they would demand greater quantities of the goods so that in the future they should not have to pay higher prices. Products have different sensitivity to changes in price. Once consumers understand the functioning of such goods, they will certainly have a positive attitude and this improves the likelihood of them buying the good. The demand for those goods on which a negligible amount of the total income of the consumer is spent is said to be inelastic. Factors Influencing Demand for a Commodity: They are many factors on which the demand for a commodity depends.
Soon, your customers began preferring the Sega console to the Atari console, and that increase in demand for what your competitor was selling significantly lowered demand for your Atari products. However, when the demand for a product is elastic, little variation in the price may result in large changes in quantity demanded. Why Marketers Need to Pay Attention to Non-Price Factors Non-price factors have the potential to greatly influence the success of an item on the market at any given time. Price Fluctuations Price fluctuations are a strong factor affecting supply and demand. The elasticity of demand for a necessary good is relatively small.
If these other things or the determinants of demand change, the whole demand schedule or the demand curve will change. It is because of this reason that the increase in income has a positive effect on the demand for a good. It should be noted that it might not happen, if other things do not remain constant. Price of Related Goods: Demand for the given commodity is also affected by change in prices of the related goods. As incomes rise, many people will buy fewer generic-brand groceries and more name-brand groceries.
From 1980 to 2012, the per-person consumption of chicken by Americans rose from 33 pounds per year to 81 pounds per year, and consumption of beef fell from 77 pounds per year to 57 pounds per year, according to the U. For example, rice is very much a necessary good to us, and so its demand cannot be reduced considerably when its price rises. For example, since tea, a close substitute for coffee, is available in the market, a rise in the price of coffee would result in a considerable fall in its demand and a consequent rise in the demand for tea. Income and Credit Changes in income level and credit availability can affect supply and demand in a major way. They are called determinants of demand. For, when the price is very small, a change in price would have no considerable effect on demand.
For example, if the price of petrol is expected to rise in future, its present demand will increase. Of course, there are a lot more factors in micro or macro economicsaffecting demand or supply, because these are two broad terms. One deal or non price factor that causes me to buy is a deal called buy one get another at equal cost for free. Transport Conditions: Refer to the fact that better transport facilities increase the supply of products. Commercial Advertising Commercials on television, internet and radio have an effect on supply and demand in that they make more people aware of the availability of a product. But, elasticity of demand for a luxury good is generally high.