Following are the three determinants of demand for a commodity:
(i) Price of the commodity (Px) Demand of the commodity is inversely related to its price. When the price of a commodity falls in the market, its demand increases and vice-versa.
(ii) Income of the consumers (Y) Income provides purchasing power for the purchase of commodities. Change in the income of the consumer affects his demand for normal and inferior goods, as discussed below:
(a) Normal goods These are the goods for which the demand is directly related to consumers’ income. Other things remaining constant, demand for these goods increases in response to increase in consumer’s income and vice-versa, e.g. full cream milk, pulses, grains, etc.
(b) Inferior goods These are the goods for which the demand is inversely related to consumers’ income. Other things remaining constant, demand for these goods decreases in response to increase in income and vice-versa, e.g. coarse cereals, toned milk, etc.
(iii) Price of related goods (Pr) Demand for a commodity is also influenced by change in price of related goods. These are of two types, viz substitute goods 'and complementary goods.
(a) In case of substitute goods, market demand for a commodity falls with fall in price of the substitute commodities and vice-versa, e.g. tea and coffee.
(b) In case of complementary goods, market demand for the commodity rises with fall in the price of complementary commodities and vice-versa, e.g. car and petrol.