1977-11-24 — Page 27

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1978

「中學會考試題預習專欄

明德社主辅

經濟與公共事務 (八) 孔繁盛

Economic and Public Affairs

Demand

Factors affecting changes in demand

The demand for a com- modity may be affected by some significant factors. An increase in the market demand for a commodity can be represented graphically by a rightward shift in demand curve in Fig. 1. It means that at every price level more quantities will be demanded than before by the market as a whole. On the contrary, a leftward shift in-demand curve means a reduction in market dema- nd.

Increase In

demand

Decrease in

demand

Factors affecting ch- anges in demand can be gen- erally classified as follows: (1)Income: The real income of consumers determines the demand for a commodity to a great extent for it refl- ects the real purchasing power of consumers. So a general increase in society income will lead to an increase in demand for it. This is expecially true for luxury goods.

(2)Taste and fashion: This is a dynamic factor which makes demand change freque- ntly. In a society, consu- mer taste for a certain commodity changes from time to time. Thus a commodity: may be demanded more for consumer taste has changed to be in favour of it. This is especially true for con- sumer goods which depend largely on advertising. (3)Prices of other commodi- ties: The demand for a commodity is sometimes affected by the prices of other commodities, especia- lly those of its substitut- es and complements.ASE price increase in a commo- dity's substitute will in- crease the demand for it, while a price increase in its complement will reduce

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24

the demand for it. example, a price increase in public bus will increase the demand for mini-bus in the market as a whole, while a price increase in gasoline will generally reduce the demand for motor car.

(4)Population: In a socie- ty of growing population, the demand for necessary goods continues to increase: This is mainly due to the increasing demand from the growing population. (5)Government policy: The government regulation of the market also affects the demand. If the government were to increase sales tax on a commodity, the demand will necessarily be reduced to the extent depending on the nature of the commodity concerned. In Hong Kong, there is an increasing con- cern on consumer education provided by Consumer Counc- il This will more or less. affect the demand for cons- umer goods.

Elasticity of demand (E)

The elasticity of demand for a commodity shows. the responsiveness of chan- ges in its quantity demand- ed to its price changes.

change in quantity

demanded

change in price

Suppose the price of a commodity decreases from $4 to $2, as shown in the fol lowing figure, while the qunatity demanded for it increases from 40units to 80 units correspondingly. Thus the elasticity of de- mand for that commoditý d

=

0-5 50%

The elasticity of demand for a commodity may be equal to, more than, or less than one. In some ex- treme cases, it may be zero or infinitive. The follow- ing figures show the demand curves of different elasti- cities.

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便得

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