Consumers’ expectation and demand

Consumers’ expectation with regard to their future income and future prices of the goods in question in relation to its substitutes and complementary products exert influence on the demand for many goods. For example graduate students are often observed to spend beyond their means, for their future incomes are high, while the service people in their fifties try to cut on non-essentials, for their future incomes are low. Thus, an increase in expected future income leads to an increase in the demand for some consumers’ goods and vice versa. Similarly, an increase in the expected future price of a product leads to an increase in the demand for that product in the current period. To cite an example, in the month of February, there is generally an upward movement in the demand for much luxury and semi luxury items (e.g. refrigerators, air conditioners. Televisions), for there is always a fear that their prices go up after the new budget is announced on the last day of February. Also, when consumers fear shortage of a commodity, they are often found to buy and stock under panic. Quite the opposite holds good when there are rumors of bumper crops.

The expectations’ variable plays a more significant role in the case of demand for durable and expensive items than it does in the case of demand for perishable and cheap products This is because the purchase of durables can be postponed and advanced more easily that those of non durables and the price changes matter more in the case of expensive goods than non-expensive ones. For this reason, the expectations’ variables are often left out from the list of demand determinants for non-durables and cheap goods.

The aggregate demand for a good obviously depends also on the number of consumers. Other factors remaining the same, the larger the number of consumers, the greater is the demand, and vice versa. Thus, the demand for almost all the products in India as well as in the world as in the world as a whole is increasing over time, partly because the population as well as in the world is increasing over time, partly because the population is increasing over time.

Since demand for most products vary from consumer to consumer, distribution of consumers among appropriate categories also exert an influence on the aggregate demand. For example, demand for a car depends on the distribution of households into rich and poor ones. If the proportional of rich households to the total number of households increases, demand for cars would increase and vice versa. Similarly demand for cosmetics would increase if the proportion of women in the total population increases, demand for baby food would fall if the proportional of babies in the total population falls, and so on. The other relevant distributions in this respect could be male and female, smokers, non-smokers, vegetarians and non-vegetarians, literates and illiterates, Hindus and non Hindus, and so on. Obviously, all these distribution are never simultaneously important in the case of a study of the demand for any one product. Thus, the researcher has to try to choose only the appropriate ones for a particular demand.

Needless to say, neither the population nor its distribution is a relevant determinant of the demand for a good by an individual consumer.

This is not an exhaustive list of the determinant of demand for consumers’ products. However, it does include all the significant ones. The remaining factors are basically psychological and climatically and therefore difficult to quantify. It must also be emphasized here that all the determinants are not equally important in the demand for various goods and services. Some variables are significant in the demand for some goods, while other variables are important in demands for other goods.