Determinants of demand are normal products, inferior products, substitute products and complementary products. The demand of normal products increase as income increases and demand decreases when income decreases. An example would be the latest video games. As our income increases, so does demand for video games. The demand decreases while our income does.
Inferior products on the other hand are products that experience an increase in demand as our income decreases and a decrease in demand as our income increases. No name brand products would be an example of inferior products. As income decreases, the demand for no name products rises. As income increases, the demand for no name products decreases and there is an increase in demand for brand name products.
Switching from brand name products to no name products is an example of substitute products. If the price of a product increases, then there will be more of a demand for a similar product.
The demand for complementary products is related because they are purchased together. If you recall the video game example, let’s say that there is a new games console released and there is a high demand for it. Then there would also be an increased demand for accessories such as games, cables, extra controllers, etc.
Another example of substitute products effecting demand would be in the case of the Chicago Tylenol scare in the 80s.
There were a number of bottles of Tylenol that had been tampered with. Seven people died as a result of taking extra strength Tylenol with traces of cyanide in the capsules. Johnson & Johnson recalled all their bottles of Tylenol. Demand for Tylenol dropped significantly until the late 80s when Tylenol was re-launched. While the demand fell for Tylenol, demand increased for substitute products.
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