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MARKET DEMAND ANALYSIS.
What is Demand? ■ Demand is defined as that want, need or desire backed by willingness and ability to buy a particular commodity, in a given period of time. ■ Or in other words demand is the quantity of a commodity which consumers are willing to buy at a given price for a particular unit of time.
What is Individual Demand? ■ The individual demand is the demand of one individual or firm. It represents the quantity of a good that a single consumer would buy at a specific price point at a specific point in time. ■ A seller is least interested in an individual consumers demand, but however he is interested in the total market for its product.
What is Market Demand? ■ Market demand provides the total quantity demanded by all consumers. In other words, it represents the aggregate of all individual demands. ■ There are two basic types of market demand: 1. Primary demand is the total demand for all of the brands that represent a given product or service, such as all phones or all high-end watches. 2. Selective demand is the demand for one particular brand of product or service, such as the i. Phone or a Michele watch.
Determinants of Demand ■ Price of the Product ■ Income of the Consumer ■ Price of Related Goods ■ Tastes and Preferences ■ Advertising ■ Consumer’s Expectation of Future Income and Price ■ Population ■ Growth of Economy ■ Consumer Credit
Factors Influencing Demand 1. Tastes and Preferences of the Consumers. 2. Income of the People. 3. Changes in Price of the Related Goods. 4. Advertisement Expenditure. 5. The Number of Consumers in the Market. 6. Consumers Expectations with Regard to Future Prices.
Demand Function ■ The demand equation is the mathematical expression of the relationship between the quantity of a good demanded and those factors that affect the willingness and ability of a consumer to buy the good.
Demand Curve & Its Characteristics ■ In economics the demand curve is the graphical representation of the relationship between the price and the quantity that consumers are willing to purchase. ■ The graph shows the law of demand, which states that people will buy less of something if the price goes up and vice versa.
Law of Demand ■ Law of Demand: recognizing the fact that price of the product is the single most important variable of a product demand. the law of demand has been proposed. It states that other things remaining constant when the price of a commodity rises, the demand for that commodity falls & vice versa. ■ Explanation : law of demand states that , ceteris paribus , demand for a product is inversely proportional to its price. ■ Ceteris paribus is a latin phrase, literally translated in English as “with other things being the same. ”
Exceptions to the Law of Demand. ■ Giffen Goods ■ Snob Appeal ■ Demonstration Effect ■ Future Expectation of Prices ■ Insignificant Proportion of Income Spent ■ Goods with No Substitutes
Reasons for Increase in Demand 1. The fashion for a goods increases or people’s tastes and preferences become more favourable for the good; 2. Consumer’s income increases. 3. Prices of the substitutes of the goods in question have risen. 4. Prices of complementary goods have fallen. 5. Propensity to consume of the people has increased and 6. Owing to the increase in population and as a result of expansion in market, the number of consumers of the goods has increased.
Reasons for Decrease in Demand 1. A goods has gone out of fashion or the tastes of the people for a commodity have declined. 2. Incomes of the consumers have fallen. 3. The prices of the substitutes of the commodity have fallen. 4. The prices of the complements of that commodity have risen and 5. The propensity to consume of the people has declined. In other words, the propensity to save has increased.