---
title: "Short note: factors affecting demand"
subject: "Engineering Economics"
chapter: 1
key: "semester_6/engineering_economics:short-note-factors-affecting-demand"
source: https://www.bctengineer.com/q/semester_6/engineering_economics/short-note-factors-affecting-demand
site: BCT Engineering
---

# Short note: factors affecting demand

Engineering Economics · Chapter 1: Introduction

- Asked in: 2067 Mangsir, 4 marks; 2065 Chaitra, 4 marks (asked 2 times)
- Video: [Factors Effecting Demand | Demand Function | Theory Of Demand | Economics | Microeconomics | UPSC](https://www.youtube.com/watch?v=VMAZZdqMnBI) — Yasser Khan..
- Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14
- Page: https://www.bctengineer.com/q/semester_6/engineering_economics/short-note-factors-affecting-demand
- Whole chapter: https://www.bctengineer.com/md/semester_6/engineering_economics/chapter-1

## Question

Write a short note on factors affecting demand.

## Short answer

Demand depends on price (inverse relation), consumer income, prices of substitutes and complements, tastes, population, expectations, advertising, government policy, and seasons. A price change moves along the demand curve; other factors shift the whole curve.

## Answer

Demand is the quantity of a good that consumers are willing and able to buy at a given price during a given time. The demand function is D = f(price, income, price of related goods, tastes, expectations, population, ...).

#### Main factors
1. **Price of the commodity.** Usually, when price rises demand falls (law of demand), shown by movement along the demand curve.
2. **Consumer income.** For normal goods demand rises with income; for inferior goods it falls.
3. **Prices of related goods.** Substitutes (tea and coffee): a rise in the price of one raises demand for the other. Complements (car and petrol): a rise in one price lowers demand for the other.
4. **Tastes, habits and fashion.** Changes in preference shift demand.
5. **Population and its structure.** Size, age, and sex mix change the market.
6. **Expectations of future price or income.** If prices are expected to rise, people buy now.
7. **Advertising and promotion.**
8. **Government policy.** Taxes, subsidies, import duty and credit rules.
9. **Seasons, climate and festivals** (Dashain, winter clothes).
10. **Income distribution and credit availability.**

A change in price causes movement along the curve; a change in any other factor shifts the whole demand curve.

## Check yourself

The answer's key points as multiple-choice questions, with the correct option and why.

1. A change in the price of the commodity itself causes:
   A. A movement along the demand curve
   B. A shift of the whole curve
   C. No change in demand
   D. A change in tastes
   Answer: A. Only price changes move along the curve; other factors shift it. (Key point: Movement vs shift)

2. If the price of petrol rises, demand for cars (a complement) generally:
   A. Stays the same
   B. Falls
   C. Doubles
   D. Rises
   Answer: B. A rise in one complement's price lowers demand for the other. (Key point: Complements)

3. When consumer income rises, demand for an inferior good:
   A. Becomes infinite
   B. Rises
   C. Falls
   D. Is unchanged for normal goods only
   Answer: C. Inferior goods are replaced by better ones as income rises. (Key point: Inferior goods)

4. If people expect prices to rise soon, they:
   A. Buy less now
   B. Stop buying forever
   C. Wait for the price rise
   D. Buy more now
   Answer: D. Expected price rises raise present demand. (Key point: Expectations)

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