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ECONOMIC AND DEMOGRAPHIC
DETERMINANTS
Prof. SAVICA
ECONOMIC DETERMINANTS
People buy products from rational motives
Maximum value for money!
income
price credits
ECONOMIC DETERMINANTS
Income1
Discretionary income– financial basis for buying!
Total income (Gross income)
- Taxes
Disposable income (Net income)
-Binding (mandatory) charges and expenditures on necessary items
(food, water, electricity, gas, rent, clothing, utilities, medicaments)
Discretionary income******
-Spending
(luxury products, vacations, non-essential goods and services)
- Savings
financial uncertainty
planned future activities
ECONOMIC DETERMINANTS
Income1
Economic law
“When income increases, demand increases too”
Necessary item for life, less elasticity!
Not so necessary item for life, more elasticity!
ECONOMIC DETERMINANTSPrice2
Economic law
“When price increases, demand decreases"
“When price decreases, demand increases"
price
quantity
D
ECONOMIC DETERMINANTSPrice2
Exceptions of Law of Demand
Giffen's paradox
“When price rises, the demand increases too”
price
quantity
D
Inferior goods
ECONOMIC DETERMINANTSPrice2
Exceptions of Law of Demand
Veblen's paradox
"With an increase of the price, demand increases as well"
“When price falls, demand decreases as well"
price
quality
D
Luxury goods
ECONOMIC DETERMINANTSPrice2
Exceptions of Law of Demand
Case of speculation
“When the increase of a price is expected, demand increases as
well”
price
quantity
D
Speculative products
ECONOMIC DETERMINANTSCredits3
Demand can be stimulated by taking credits!
Durable, expensive goods
DEMOGRAPHIC DETERMINANTS
Population1
2
3
4
5
6
7
Geographical distribution
Internal migrations
Education
National structure
Age structure
Family life cycle
DEMOGRAPHIC DETERMINANTS
Population1
Market size, global consumption
DEMOGRAPHIC DETERMINANTS
2
Climate and geographical regions, municipalities Rural vs. Urban population Central versus peripheral part of the municipality
Geographical distribution
DEMOGRAPHIC DETERMINANTS
3
Population mobility from one place to another – due to living
Social mobility – mobility due the change of working place
Internal migrations
DEMOGRAPHIC DETERMINANTS
4 Education
DEMOGRAPHIC DETERMINANTS
5 National structure
DEMOGRAPHIC DETERMINANTS
6 Age structure
DEMOGRAPHIC DETERMINANTS
7 Family Life Cycle
baby
child
teenager
student
MINI TEST
Explain the following items:
• Disposable income: ------------------------------• Giffen goods: -----------------------------• Veblen goods:----------------------------• Savings:---------------------------------------• Speculative goods:---------------------------------------------• Internal migrations:----------------------------------------------• Age structure:---------------------------• National structure:-------------------------------------------
