Describe the factors that influence the level of demand for the foods

These other factors determine the position or level of demand curve of a commodity.

It may be noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward as the case may be. The following factors determine market demand for a commodity.

1. Tastes and Preferences of the Consumers:

An important factor which determines the demand for a good is the tastes and preferences of the consumers for it. A good for which consumers’ tastes and preferences are greater, its demand would be large and its demand curve will therefore lie at a higher level. People’s tastes and preferences for various goods often change and as a result there is change in demand for them.

The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products. On the contrary, when certain goods go out of fashion or people’s tastes and preferences no longer remain favourable to them, the demand for them decreases.

2. Income of the People:

The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa.

The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good.

When the incomes of the people fall, they would demand less of a good and as a result the demand curve will shift downward. For instance, as a result of economic growth in India the incomes of the people have greatly increased owing to the large investment expenditure on the development schemes by the Government and the private sector.

As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased. Likewise, when because of drought in a year the agriculture production greatly falls, the incomes of the farmers decline. As a result of the decline in incomes of the farmers, they will demand less of the cotton cloth and other manufactured products.

3. Changes in Prices of the Related Goods:

The demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant.

Therefore, when the prices of the related goods, substitutes or complements, change, the whole demand curve would change its position; it will shift upward or downward as the case may be. When the price of a substitute for a good falls, the demand for that good will decline and when the price of the substitute rises, the demand for that good will increase.

For example, when price of tea and incomes of the people remain the same but the price of coffee falls, the consumers would demand less of tea than before. Tea and coffee are very close substitutes. Therefore, when coffee becomes cheaper, the consumers substitute coffee for tea and as a result the demand for tea declines. The goods which are complementary with each other, the fall in the price of any of them would favorably affect the demand for the other.

For instance, if price of milk falls, the demand for sugar would also be favorably affected. When people would take more milk, the demand for sugar will also increase. Likewise, when the price of cars falls, the quantity demanded of them would increase which in turn will increase the demand for petrol.

4. Advertisement Expenditure:

Advertisement expenditure made by a firm to promote the sales of its product is an important factor determining demand for a product, especially of the product of the firm which gives advertisements. The purpose of advertisement is to influence the consumers in favour of a product. Advertisements are given in various media such as newspapers, radio, and television. Advertisements for goods are repeated several times so that consumers are convinced about their superior quality. When advertisements prove successful they cause an increase in the demand for the product.

5. The Number of Consumers in the Market:

The market demand for a good is obtained by adding up the individual demands of the present as well as prospective consumers of a good at various possible prices. The greater the number of consumers of a good, the greater the market demand for it.

Now, the question arises on what factors the number of consumers for a good depends. If the consumers substitute one good for another, then the number of consumers for the good which has been substituted by the other will decline and for the good which has been used in place of the others, the number of consumers will increase.

Besides, when the seller of a good succeeds in finding out new markets for his good and as a result the market for his good expands the number of consumers for that good will increase. Another important cause for the increase in the number of consumers is the growth in population. For instance, in India the demand for many essential goods, especially food grains, has increased because of the increase in the population of the country and the resultant increase in the number of consumers for them.

6. Consumers’ Expectations with Regard to Future Prices:

Another factor which influences the demand for goods is consumers’ expectations with regard to future prices of the goods. 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. Similarly, when the consumers expect that in the future the prices of goods will fall, then in the present they will postpone a part of the consumption of goods with the result that their present demand for goods will decrease.

76) Describe the factors that influence the level of supply of the foods
In economics, supply refers to the quantity of a product available in the market for sale at a specified price at a given point of time.
Unlike demand, supply refers to the willingness of a seller to sell the specified amount of a product within a particular price and time.
Supply is always defined in relation to price and time. For example, if a seller agrees to sell 500 kgs of wheat, it cannot be considered as supply of wheat as the price and time factors are missing.
i. Price:
Refers to the main factor that influences the supply of a product to a greater extent. Unlike demand, there is a direct relationship between the price of a product and its supply. If the price of a product increases, then the supply of the product also increases and vice versa. Change in supply with respect to the change in price is termed as the variation in supply of a product.
Speculation about future price can also affect the supply of a product. If the price of a product is about to rise in future, the supply of the product would decrease in the present market because of the profit expected by a seller in future. However, the fall in the price of a product in future would increase the supply of product in the present market.
ii. Cost of Production:
Implies that the supply of a product would decrease with increase in the cost of production and vice versa. The supply of a product and cost of production are inversely related to each other. For example, a seller would supply less quantity of a product in the market, when the cost of production exceeds the market price of the product.
In such a case the seller would wait for the rise in price in future. The cost of production rises due to several factors, such as loss of fertility of land, high wage rates of labor, and increase in the prices of raw material, transport cost, and tax rate.
iii. Natural Conditions:
Implies that climatic conditions directly affect the supply of certain products. For example, the supply of agricultural products increases when monsoon comes on time. However, the supply of these products decreases at the time of drought. Some of the crops are climate specific and their growth purely depends on climatic conditions. For example Kharif crops are well grown at the time of summer, while Rabi crops are produce well in winter season.
iv. Technology:
Refers to one of the important determinant of supply. A better and advanced technology increases the production of a product, which results in the increase in the supply of the product. For example, the production of fertilizers and good quality seeds increases the production of crops. This further increase the supply of food grains in the market.
v. Transport Conditions:
Refer to the fact that better transport facilities increase the supply of products. Transport is always a constraint to the supply of products, as the products are not available on time due to poor transport facilities. Therefore even if the price of a product increases, the supply would not increase.