Demand doesn’t only change because of price — several other powerful forces influence how much we buy. Today, I’m breaking down the key non-price factors affecting demand from my O-Level Economics revision. From income and advertising to taxes and substitute goods, let’s make demand easy to understand!
1. Income = Purchasing Power
As income increases, people buy more branded and expensive (normal) goods like clothes, electronics, and restaurant meals.
As income decreases, people shift toward cheaper (inferior) goods — like second-hand items or instant noodles.
Example:
Higher income → Private transport
Lower income → Public transport
2. Direct Taxes Reduce Demand
Direct taxes like Income Tax (tax on salary) and Corporation Tax (tax on company's profit) reduce people's disposable income.
When income falls due to tax, purchasing power decreases → demand falls.
3. Prices of Related Goods
Substitute Goods:
Can be used instead of each other (e.g., Coke & Pepsi)
If Coke becomes expensive, people buy more Pepsi.
Complementary Goods:
Are used together (e.g., Cars & Petrol)
If car prices rise, fewer people buy petrol too.
4. Advertising Influences Demand
Informative Ads:
Share facts — e.g., “Smoking Kills” on cigarette packs
Aimed to educate
Persuasive Ads:
Use emotion or celebrities to attract buyers — e.g., shampoo ads with celebs
5. Consumer Preferences
Changing trends, fads, and social values affect demand.
Example: Eco-friendly products are more in demand now due to climate awareness.
Conclusion:
So remember — even if prices stay the same, demand can rise or fall due to income changes, taxation, advertising, substitutes, and more.
Understanding these non-price factors helps businesses and students predict consumer behavior better.
Want more simple, clear Economics like this?
Follow my blog for weekly revision notes — and check out my YouTube video on "Added Value" too!
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