Monday, May 19, 2014

Reasons for Decline in Demand

There are certain reasons for the sudden decline of demand for our commodity.
1. Availability of cheap substitutes: The main reason is the availability of cheap substitutes in the market i.e. more substitutes is available in the market at low price. So that people buy more of that commodity and because the demand for our commodity falls. Substitution effect means change in demand due to substituting one commodity for another.  When price of a commodity falls the cheaper commodities will be substituted in the place of dearer commodities. Thus price of the commodity falls more of it will be demanded and the consumer uses it as a substitute for high priced commodities.
2. Lack of Advertisement: Lack of Advertisement is also a reason for the declining demand for goods. In a highly competitive market advertisement is very important and it also affect the change in demand. The main objective of advertisement is to create additional demand by attracting more consumers to our product. So we must advertise well to increase our demand of our product.
3. Technological progress: Technological progress also affect demand for a commodity. Inventions and discoveries bring new things in the market. So people will not demand older things. So we must use more technological devices to improve the demand for our product.

4. Lack of demonstration: Lack of demonstration also brings out our commodity to a fall in demand i.e. people get motivated or they were attracted by the demos given by us and they will buy that product not because of their increase in income or it becomes a cheaper product but their neighbour or relatives bought it. Tendency of the consumer to imitate others will help us to increase the demand for our commodity.
5. Free goods: More Free goods are given by other producer to attract consumers and that will affect the demand of our product. So we also gave more free goods than the other companies.

Because of these reasons we must forced to reduce the price of our commodity to increase our commodities demand. For this we must know the different market conditions and the factors affecting demand for a commodity.

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