Factors affecting Demand - UPSC notes

Factors affecting demand  The demand for goods and services in an economy is influenced by several key factors. Here's an overview of each factor you mentioned: Price of the Goods : Law of Demand : As the price of a good increases, the quantity demanded tends to decrease, and vice versa, all else being equal. This is due to the substitution effect (when consumers opt for cheaper alternatives) and the income effect (when higher prices reduce the purchasing power of consumers). In other words, there is an inverse relationship between the price of a good and its quantity demanded. Consumer's Income : Normal Goods : As a consumer's income rises, the demand for normal goods also rises, because people can afford to buy more. Examples include branded clothes, electronics, and dining out. Inferior Goods : For inferior goods, the demand decreases as consumer income rises. These are goods that people tend to buy less of when they can afford higher-quality alternatives, such as low-cost instant …