Civil Engineering Reference
In-Depth Information
earlier in this chapter, we were able to specify some of the other determinants - the
other things - because we identified what 'n' specifically represented. For example,
we often referred to the age and condition of the existing stock, and an assessment
of need.
Table 4.7
Factors affecting the demand for any product
P
n
The price of the product
The price of other products
P
n-
1
Y
G
Income
Government policy
A host of other things
...
Key Points 4.1
❍
The basic law of demand is that as price rises, lower quantities are
demanded; and as price falls, higher quantities are demanded. There is an
inverse relationship between the price and the quantity demanded, other
things being equal (see
Figure 4.1)
.
❍
In the construction industry there appear to be many determinants that
affect demand, including the price (rent) of the building or infrastructure,
the price of other goods (such as substitute goods), current level of income
and government policy.
❍
Much of the demand for construction activity is of a derived nature, in as
much as the goods are not necessarily demanded in their own right but for
what they can add to the final good or service being produced.
❍
The relationship between the quantity demanded and the various
determinants of demand can be expressed as an equation. The general
terms used in the equation are shown in
Table 4.7.
CHANGING MARKET CONDITIONS
Clearly there are many non-price determinants of demand, such as the cost of
financing (interest rates), technological developments, demographic make-up, the
season of the year, fashion, and so on. For illustrative purposes we will consider
just four generalised categories - income, price of other goods, expectations and
government - taking each in turn and assuming
ceteris paribus
in each case.
Income
For most goods, an increased income will lead to an increase in demand. The phrase
increase in demand correctly implies that more is being demanded at each and every
