Non-monetary determinants of demand and supply

The demand and supply are usually compared monetarily, keeping all the other factors constant. Here is a piece of writing which shows the non-monetary determinants which effect the demand and supply of a product. Let the product be Maggi.

Various factors that effect the demand of the product are:

Taste

The most important determinant of demand is the taste of customer. Because of the taste of customer, Maggi has been in the market unbeatably since a long time and still rules the market with 60% of market share.

Expectations

If the price of Maggi is expected to fall in upcoming days, all the Maggi lovers will try to keep a stock for themselves in advance so as to enjoy their Maggi at the same old price and keep up with the budget.

Population

Demand depends upon the number of buyers. If the number of people increase as consumer of Maggi, the demand will go up.

Consumer income

If the income of a consumer goes down, he/she will try to manage his/her expenditure and will try to cut the non-compulsory expenses. This will effect the demand of Maggi.

Various factors that effect the supply of the product are:

Technology

Technology has a major role in manufacturing firms. Better technology leads to more number of products made in less number of time and less costs. Thus, more number of items can be produced in less time.

Expectation

The amount of Maggi being supplied depends upon the future expectations. If their is an expectation that the competing noodle brands will increase the rate of their noodles, Nestle will try to dispatch less number of packets so as to gain profit.

Population of sellers

If a popular mart or some shops close down, the supply of Maggi will be effected as market supply depends upon the number of these sellers.

Input cost

If the input cost of one or two ingredients of Maggi goes up, the product will become less profitable and firms will supply less Maggi.

Referred from- Principles of Microeconomics. By N. Gregory Mankiw