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Ismail Hassan
Answer to Non-price Determinants of Demand Question


You have already learned that demand is dependent upon people willingness and ability to pay for the goods or services they want or need. If people are unwilling or unable to pay for the goods or services then demand will not exist. And people's willingness and ability rest heavily on the price of goods. Logic tells us that if a good or service is priced too high, then people may be unwilling or unable to pay for them. Therefore, price plays a very important role in demand. If the price of goods is right, then people are willing and able to buy them a condition that is necessary for goods to be demanded. But price is not the only determinant of demand. There are other non-price factors as well. We shall discuss these factors here.

One non-price determinant of demand is population. Imagine an island without people (zero population). Certainly there is no demand here for books, or burgers, or bus services. There is no demand because there is no willingness or ability to buy because there is no people! The situation is different in the capital city of Kuala Lumpur. With a population of close to 2 million people, KL certainly has more demand for more goods and services. What do you think will happen to the demand of taxi services in KL if the population of KL suddenly increased to 3 million? Well, there will be an increase in demand, and this can be illustrated by the shifting of the demand curve to the right of its original position. So you can see here that population creates demand and changes in population cause changes in demand.

Income is another non-price factor affecting demand. Income is closely associated to people's purchasing power. The more income a person has, the more will his willingness and ability to pay for goods or services he desires. The average income of Malaysians is high compared to other nationals and this explains why there is a high demand for many types of goods and services in this country. They demand cars, shoes, bicycles, and millions other things. In poor nations, the demand for certain goods is non-existent because people simply cannot afford to buy them. What will happen if the average income of Malaysians increases? If there are changes to income earned, then there will also be changes in demand. If the average income of Malaysians increases, then the demand curve will shift to the right of its original position. It is important to note that income determines whether or not there is demand, but changes in income levels will result in changes to demand (shifting of the demand curve). Where will the demand curve shift if income decreases?

Tastes and preferences are also non-price determinants of demand. I guess students on this campus has no taste for sea lion meat. Even if they can afford them, I doubt very much if they are willing to buy them. Therefore, there is probably no demand for sea lion meat. I notice however, that the majority of students here have a taste for cellular phones. Some consider it a necessity but most have it for style.  Some says that it is fashionable to have his or her phone ringing every now and then (although it is irritating to others most of the time!). So there is a demand for cellular phones on campus. Tastes and preferences are also governed by one's culture. As an example, in certain cultures, certain food or items is preferred during certain festive seasons. The Chinese, for instance, demand mandarin oranges during the Chinese New Year. The Malays certainly don't demand oranges during Hari Raya, but they certainly demand songkoks and baju kurungs.

The demand of one good can create the demand for another, particularly in the case of related goods. Because there is a high demand for bicycles on this campus, I'd say there is demand for bicycle locks too. The demand of bicycle locks is dependent on the demand for bicycles. If there is no demand for bicycles, then there is no demand for locks either.

There are other special non-price determinants of demand. The availability of better and safer roads may create the demand for better and faster cars. A flood prone area may create the demand for small boats or 4WD vehicles. A sudden heatwave may create demand for air-conditioning. An outbreak of diseases (like SARS) creates demand for facemasks. Sometimes certain conditions may eliminate demand altogether. For instance the outbreak of madcow disease in United Kingdom eliminates the demand for UK beef in favour of beef from other countries.