Published by MBA Skool Team, Last Updated: November 01, 2014
What is Demand Factor?
Demand Factor refers to condition that describes the consumer ability and willingness to purchase that particular product or service. In economics, it refers to the willingness and ability of productive activities usually, business firms to hire or employ factors of production.
Factor demand relates to factor price and factor quantity, specifically; it is the range of factor quantities that are demanded at a range of factor prices. This is one half of the factor market. The other half is factor supply. The factors of production that are subject to factor demand include any one of them or all of the four scarce resources - capital, land, labor, and entrepreneurship. However labor receives the most scrutiny and analysis because it involves human beings directly. Demand factors also include price elasticity and price points and it determines the price ceiling.
In general, a lower price increases the quantity demanded whereas a higher price has an opposite effect.
Demand Factor denoted by F_Demand (t) = Demand / Maximum Possible Demand
The primary factors on which the demand depends are
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