Demand Side Factor

The demand-side economics is mainly known as “Keynesian economics”. It is named after John Maynard Keynes, a British economist who stated many important attributes of this economics in his book General Theory of Employment, Interest, and Money. In the demand-side economics, the focus is on the people who are purchasing the goods and availing all the services and creating a demand that makes more supply. If the demand weakens, the supply chain will also slow down as it depends on the consumers and their purchases. 

Demand Side Factor 

The increase and decrease in demand for any good depend on certain factors. Understanding the varied elements that affect product demand is highly beneficial. 

• Price of the product 

Any product depends on its price; it is the deciding factor as to whether the demand will increase or decrease. Higher prices create lower demand. On the contrary, lower prices make a higher order. The price of the product depends on the customer’s purchasing power and how satisfied they are with your products; if they can’t afford your goods, your supply chain will decline. 

• Preference of the consumer 

The demand for a consumer good is highly dependent on the consumer’s taste and preference. Preferences are not constant, and in an ever-expanding market with so many options, the consumers’ preferences might change and may find a better price for the product. 

For example, the taste of a single consumer and a family is entirely different. A family will likely buy products for all and primarily child-friendly products, but a single consumer will buy products for himself. Age, geography, and marital status are some of the factors that define the individual’s preferences. 

• Income of consumer

Consumers, on an average, like to spend and buy more when they have more money. Rich people purchase more frequently, but they also desire higher quality and more expensive items. A consumer’s demand can fluctuate and flow in tandem with overall economic stability. Consumers will spend less during the recession than they would in a boom. 

• Expectation of consumer 

A variety of factors can influence consumer expectations.For example, the Covid-19 pandemic prompted people in the U.S. to stock up on toilet paper and hand sanitisers across the globe. 

It was difficult to predict such reactionary spending before the outbreak. Thus, it is difficult to anticipate demand; we must pay attention to habits and expectations of the consumers instead. Looking at the historical data, it is difficult to predict and comprehend these expectations. So, we can only assume the upcoming scenario.

• Number of consumers in the market 

Demand is determined by the number of people who purchase a particular item. As a result, the bigger the market, the more availability of consumers. The figure may rise in some circumstances due to population shifts, but in other cases, demand increases due to the product’s appeal to a broader population. Although the total number of consumers remains the same, the number of purchases increases. 

Types of Demand 

Some of the demands in economics are given below:

• Direct demand 

Demands meant for direct consumption are known as immediate demand; this demand is made for final consumption. For example, goods like food and clothes have a direct request. 

• Indirect Demand

Indirect demand or derived demand is the type where the goods are in demand because they can be used to produce some other commodity. For example, factors of production have indirect demand because they are used in goods made for final consumption. 

• Joint Demand

When two products have joint demand, it means these goods are demanded together, i.e., one is nothing without the other. For example, pen and ink are pressed together as a pen has no significance without ink. 

• Composite demand 

The type of demand is used to satisfy various wants, like water, etc.. 

• Competitive demand

It refers to the demand for goods that have to face high competition from their close substitutes like Coke and Pepsi, Nike and Puma, etc. All these goods come under a competitive market. Another example of competitive demand can be Sprite and Mountain Dew.

Conclusion 

If people are unwilling to consume and firms are not interested in building new factories, the government can intervene by increasing government expenditure to stimulate demand for products and services. During the national recession, the demand side economics advocates for more government spending to stimulate economic growth. Money in the middle and lower class pockets benefits the economy rather than saving up and providing it to the rich people.