Determinants

Determinants are what cause a shift in the demand curve.

Price of the commodity.

Generally an individual is willing to purchase more of a commodity when its price is low and less of it when its price is high.

Prices of related commodities.

When a change in price of the other commodity leaves the amount demanded of the commodity under consideration unchanged, we say that the two commodities are unrelated, otherwise these are related. The related commodities are of two types' substitutes and complements. When the price of one commodity and the quantity demanded of the other commodity move in the same direction (i.e., both increase together and decrease together).

Income of the individual

The amount demanded of a commodity also depends upon the income of an individual. With an increase in income, increased amount of most of the commodities in his consumption bundle, though the extent of the increase may differ between commodities.

Tastes and preferences

It is quite well that the change in tastes and preferences of consumers in favor of a commodity results in smaller demand for the commodity. Modern business firms, which sell product with different brand names, rely a great deal on influencing tastes and preferences of households in favor of their products (with the help of advertisements, etc.) in order to bring about increase in demand of their products.

Tastes of the consumers

The amount demanded also depends on consumer's taste. Tastes include fashion, habit, customs, etc. A consumer's taste is also affected by advertisement. If the taste for a commodity goes up, its amount demanded is more even at the same price and vice-versa.

Wealth

The amount demanded of a commodity is also affected by the amount of wealth as well as its distribution. The wealthier are the people, higher is the demand for normal commodities. If wealth is more equally distributed, the demand for necessaries and comforts is more. On the other hand, if some people are rich, while the majority is poor, the demand for luxuries is generally less.

Government policy

Government policy affects the demand for commodities through taxation. Taxing a commodity increases its price and the demand goes down. Similarly, financial help from the government increases the demand for a commodity.

Expectations regarding the future

If consumers expect changes in price of a commodity in future, they will change the demand at present even when the present price remains the same. Similarly, if consumers expect their incomes to rise in the near future, they may increase the demand for a commodity just now.

Climate and weather

The climate of an area and the weather prevailing there has a decisive effect on consumer's demand. In cold areas, woolen cloth is demanded. During hot summer days, ice is very much in demand. On a rainy day, ice-cream is not so much demanded.

State of business

The level of demand for different commodities also depends upon the business conditions in the country. If the country is passing through boom conditions, there will be a marked increase in demand. On the other hand, the level of demand goes down during depression.