Explain six factors that may lead to an increase in demand for commodities in a market. (12 marks)November 2022

There are several factors that can lead to an increase in demand for commodities in a market. Some of the most important include:

1. Population growth: As the population increases, so does the demand for goods and services. This can lead to an increase in demand for commodities, as more people need to purchase them to meet their basic needs.
2. Income growth: As incomes rise, people have more disposable income to spend on goods and services. This can lead to an increase in demand for commodities, as people are able to afford to purchase more of them.
3. Changes in consumer preferences: Consumers’ preferences and tastes can change over time, leading to an increase in demand for certain commodities. For example, if there is a trend towards more healthy eating, there will be an increase in demand for organic fruits and vegetables.
4. Technological advancements: Technological advancements can make it easier and cheaper to produce goods and services, which can lead to an increase in demand. This can be the case with digitalization and automation in production process.
5. Government policies: Government policies can also affect demand for commodities. For example, if the government increases taxes on certain goods or services, it can lead to a decrease in demand for those goods or services. On the other hand, if the government provides subsidies for certain goods or services, it can lead to an increase in demand for those goods or services.
6. Advertising and marketing: The marketing and advertising efforts of firms can also affect the demand for their products. Advertising and marketing campaigns can increase awareness of a product, which can lead to an increase in demand for that product.
7. Seasonal fluctuations: demand for certain goods and services may be affected by the seasons, for example, ice-cream in summer or Christmas gifts in December.