Determinants of Demand in Business Economics

Running head: BUSINESS ECONOMICS
Business Economics
Name of the Student
Name of the University
Course ID

BUSINESS ECONOMICS1
Table of Contents
Question 1..................................................................................................................................2
Question a...............................................................................................................................2
Question b..............................................................................................................................5
References..................................................................................................................................8

BUSINESS ECONOMICS2
Question 1
Question a
Determinants of demand
Several factors influence demand of a product. Some of the important factors
affecting demand or quantity demanded of a good are as follows.
Price
The most important determinant of demand is own price of the good. Given all other
factors affecting demand, there is an inverse relation between price and quantity demanded of
the good (Kreps 2019). That is an increase in price reduce demand and vice-versa. Demand
thus changes in the opposite direction of price. A movement along the demand curve shows
change in demand here.
Figure 1: Impact of price change on quantity demand
As shown in the above figure an increase in price from P1 to P2 reduces quantity
demanded from Q1 to Q2.