Embed Size (px)
DESCRIPTION
the idea about market demand
Citation preview
Demand AnalysisKoppula.chandrasekher
1st M.B.A-13491E0037 QIS COLLEGE OF Engineering & Technology
Venga mukala palem,ongole-523002, Prakasam (Dt), A.P
E-Mail@[email protected]
Introduction
DEMAND ANALYSIS
NATURE AND TYPES OF DEMAND
FACTORS DETERMINING DEMAND
Demand determinants
DEMAND FUNCTION
LAW OF DEMAND
SIGNIFICANCE OF LAW OF DEMAND
Demand:A relation between the price of a good and the quantity that consumers are willing and able to buy during a given period, other things constant.
Willing: you want to buy the productAble: you can afford the buy the product
A product or service is said to have demand when three conditions are satisfied.
Desire on the part of the buyer to buy.Willingness to pay for it.Ability to pay the specified price for it.
Unless all these conditions are fulfilled, the product is not said to have any demand.
NATURE AND TYPES OF DEMAND:
Demand always implies at a given price how much is the quantity demanded at a given level of price? This is the volume of demand. The use and characteristics of Different products affect their demand. In other words a product with more number of uses is naturally more in demand than one with a single use.
1. CONSUMER GOODS VS. PRODUCER GOODS:
Consumer goods means the products and services which capable of satisfactory human needs. Goods can be grouped into consumer goods and producer goods. Consumer goods are those which are available for ultimate consumption, these give direct and immediate satisfaction.Ex: - bread, apple, rice.
Producer goods are those which are used foe further processing or production of goods or services to cash income.Ex: - machinery, tractor.
2. AUTONOMOUS DEMAND VS DERIVED DEMAND:-Autonomous demand refers to the demand foe products & services directly.
Ex: - The demand for the services of a super specialty hospital can be considered as autonomous, where as the demand for hotels around that hospital is called a derived demand, if there is no demand for houses, there may not be demand for steel, cement, bricks, demand for houses is autonomous whereas demand for these inputs is derived demand.
3. DURABLE VS. PERISHABLE GOODS: -Here the demand for goods is classified based on their durability. Durable goods are those goods which give service relatively for a long period. The life of perishable goods is very less, may be in hours or days.Ex: - milk, vegetables, fish.Rice, wheat, sugar, these are examples for durable goods.
Freezing facilities, the life of perishable goods can be extended for sometime.Products such as:
TV, refrigerator, and washing machines are useful for a longer period, hence they are classified as consumer durables.
4. FIRM DEMAND VS INDUSTRY DEMAND: -The firm is a single business unit where as industry refers to group of firms carrying on similar activities. The quantity of goods demanded by a single firm is called firm demand and the quantity demanded by the industry as a whole is called industry demand.
Ex: - one construction company may use 100 tones of cement during a given month. This is a firm demand. The construction industry in a particular state may have used ten million tones. This is industry demand.
6. NEW DEMAND VS REPLACEMENT DEMAND: -New demand refers to the demand for the new products and it is addition to the existing stock. In replacement demand, the item is purchased to maintain the asset in good condition.Ex: - the demand for cars is new demand and demand for spare parts is Replacement demand
7. TOTAL MARKET AND SEGMENT MARKET DEMAND: -The consumption of sugar in a given region, the total demand for sugar in the region is the total “market demand”.The demand for sugar from the sweet, making industry from this region is the segment market demand. Ex: - sugar
Determinants of Demand
IncomePrices of substitutes Prices of
complementsAdvertisingPopulationConsumer
expectations
Price of commodities:A consumer generally purchases large amount of commodities when price declines, and vice versa. thus we can say that for a normal good the price and demand inversely. A fall in the price increase consumer purchasing, power, and vice versa.Income level of the consumer (I).With in increase income of house hold buy increased amount of commodities. normally the income of the house hold and quantity of demand goes in same direction.
Prices of related goods which may be substitutes or complimentary:When a change in price of one commodity influences the demand of other commodity. Commodities are two types.1. Substitutes2. ComplementsWhen price of one commodity and quantity of other commodity move in same direct are called substitutes.Ex: tea and coffee. On the other hand the price of one good increase and quantity of other commodity is also increase.Ex: pen and ink
Expectations:Consumer may have two kinds of expectations.
1.expectations related to future income2.expectations related to future price
If the customer expects a higher income he spent more so demand increases in future.If the consumer expects a future price of good to increase he would rather than like to buy the good now than later.
The Demand Function
Dx = f ( Px, Pc, Ps, Y, t, E)
Px = Goods which obey and do not obey the Law of Demand
Pc = Price of Complimentary GoodsPs = Cost of Substitute GoodsY = Income t = TastesE = Consumers Expectation
Law of Demand
States that a quantity of a good demanded during a given period relates inversely to its price, other things constant.
Price increases Quantity Demanded decreases
Price decreases Quantity demanded increases
Creates a downward sloping demand curve
Demand Curve
Price
Quantity0
$3
$4
$5
$6
50 75 100 150 200
Demand
Point on the line that matches the schedule Every point on the line matches the schedule. It is a price/quantity demanded that consumers are willing and able to buy.
A curve showing the relation between the price of a good and the quantity demanded.
Movement Along the Demand CurveCaused by a change in price
◦Only a change in price Move from one point to another on the
same graphCalled a
◦Change in quantity demanded.
Quantity
Price
0
$5
100
Demand
$6
75
Movement along the Demand Curve
A
B
Changes in Demand
Increase in demand◦At each and every
price MORE of the good is demanded
◦Shifts to the right
D1
$5
D2
A B
Price
Quantity100 150
P Qd1 Qd2
$4 150 200
$5 100 150
$6 75 100
The increase or decrease in demand due to change in the factors other than prices to change in the factors other than price is called change in demand. Change in demand leads to a shift in the demand curve to the right or the left.
Changes in Demand
Decrease in demand◦At each and every
price Less of the good is demanded
◦Shifts to the Left
D2
$5
D1
A
B
Price
Quantity90 100
P Qd1 Qd2
$4 150 110
$5 100 90
$6 75 60
