Critically examine theory of demand supported by the examples from Essay

Critically examine theory of demand supported by the examples from wine Industry (moldovan wine) - Essay Example In other words, there is a likelihood of people tending to purchase a different product that can give them the same satisfaction or other alternatives in which they spend a smaller amount of money (Cachon & Terwiesch, 47). The relationship between price and quantity demanded is represented in the figure below (fig. 1) There are various determinants of the quantity demanded, which lead to a shift in the demand curve. The shift is either outwards whereby the demand of a product goes up or goes down (inward shift). Consumer tastes and preferences are among the determinants that can either increase or decrease the demand (Fairey, 31). For example, if consumers gain confidence in Moldovan Wine, they are likely to buy more than other kinds of wines. In such a situation, even if the price increases and that of other wines reduce, the demand may not react to the price changes. The tastes of consumers shift the demand to the right. On the other hand, if it does not satisfy consumer preferences, the demand falls (shifts to the left). The number of consumers in the particular market is also a major determinant of demand. If more consumers enter the market, the quantity demanded increases (Cachon & Terwiesch, 66). For example, if the number of Russian and other nationals in the region increases in South Africa during the FIFA world cup, the demand for Miestii Mici may rise as people tend to get a taste of the wine that they are used to. In the regions where the wine is not known to many consumers, less of it is consumed. The income of consumers also affects the demand of a commodity. For example, Miestii Mici is affordable to even the low income consumers and therefore the demand is usually high among people of diverse income levels. The prices of related goods are also a major determinant of the demand for a product. If there happens to be another product that can be used as a substitute for the Moldovan wine, consumers tend to purchase what is easily