DEMAND ANALYSIS

EVERY BUSINESS ULTIMATELY DEPENDS UPON DEMAND, DEMAND ANALYSIS & EFFECTIVE DEMAND FOR ITS PRODUCTS / SERVICES FOR ITS EXISTENCE, SURVIVAL, SUCCESS & PROSPERITY DEMAND ANALYSIS IS, THEREORE, THE MOST CRITICAL IN MARKET ECONOMY

DEMAND ANALYSIS

ACCORDING TO JOEL DEAN, THERE ARE FOUR MANAGERIAL PURPOSES OF/FOR DEMAND ANALYSIS: FORECASTING SALES MANIPULATING DEMAND APPRAISING SALES PERSONS PERFORMANCE FOR SETTING THEIR SALES QUOTAS WATCHING THE TRENDS OF / IN THE COMPANYS COMPETITIVE POSITION

WHAT IS DEMAND?

IN ECONOMICS, IT IS BASICALLY DESIRE TO ACQUIRE IN MANAGERIAL ECONOMICS, WE REFER TO EFFECTIVE DEMAND viz. DESIRE TO POSSESS/ACQUIRE WILLINGNESS TO PAY, & ABILITY TO PAY

EFFECTIVE DEMAND

EFFECTIVE DEMAND IS THE CORE / FOCUS OF A FIRM & HENCE THAT OF MANAGERIAL ECONOMICS

LAW OF DEMAND

IT STATES THAT , CETERIS PARIBUS (OTHER THINGS REMAINING CONSTANT),THERE IS AN INVERSE RELATIONSHIP BETWEEN THE PRICE & THE QUANTITY DEMANDED PEOPLE BUY MORE WHEN PRICE GOES DOWN & PEOPLE BUY LESS WHEN PRICE GOES UP

EXCEPTIONS TO LAW OF DEMAND

GIFFEN / INFERIOR GOODS STATUS SYMBOLS / GOODS / COMMODITIES SPECULATIVE GOODS EXPECTED CHANGE IN PRICE OF THE COMMODITY / SERVICE DEMONSTRATION GOODS

DEMAND SCHEDULE

THE RELATIONSHIP BETWEEN QUANTITY & THE PRICE IS CALLED DEMAND SCHEDULE PRICE QTY DEMANDED 10 100 05 200 04 250 01 1000 etc

DEMAND CURVE

DEMAND CURVE REPRESENTS THE GRAPHICAL PRESENTATION OF THE DEMAND SCHEDULE THE DEMAND CURVE GENERALLY SLOPES DOWNWARDS FROM LEFT TO RIGHT

DEMAND FUNCTION

IT REPRESENTS THE RELATION BETWEEN QUANTITIES DEMANDED & PRICE OF THE PRODUCT IT IS ALGEBRAICALLY EXPRESSED AS: Q x = f ( P x), WHERE, Q = QTY DEMANDED X = THE PRODUCT P = PRICE OF THE PRODUCT

DEMAND DETERMINANTS

PRICE OF COMMODITY / SERVICE PRICE OF RELATED COMMODITY / SERVICE LEVEL OF INCOME PRICE EXPECTATIONS INCOME DISTRIBUTION

DEMAND DETERMINANTS

NOVELTY OF THE PRODUCT / SERVICES SIZE OF THE POPULATION (DEMOGRAPHIC DETAILS) LIKES & DISLIKES TASTES & PREFERENCES

UTILITY OF DEMAND

UTILITY IS AN IMPORTANT CONCEPT IN THE STUDY OF DEMAND ANALYSIS, MARKET ANALYSIS & CONSUMER BEHAVIOUR UTILITY IS THE INDIVIDUAL PERCEPTION OF HIS OWN SATISFACTION FROM CONSUMING ANY SPECIFIC PRODUCT OR COMBINATION OF GOODS & SERVICES

UTILITY OF DEMAND

UTILITY IS: MENTAL FEELING EXPECTED DEGREE OF VALUE OF A PRODUCT EXPECTED SATISFACTION

UTILITY FUNCTION

UTILITY FUNCTION CAN BE EXPRESSED AS : U = f (X1,X2,X3, .Xn) OR U = f ( X,Y), WHERE X & Y DENOTERESPECTIVELY THE LEVELS OF CONSUMPTION OF TWO COMMODITIES

MARGINAL UTILITY

MARGINAL UTILITY IS THE ADDITION TO TOTAL UTILITY OBTAINED BY CONSUMING ONE EXTRA UNIT OF A COMMODITY TO THE CURRENT RATE OF CONSUMPTION, HOLDING CONSTANT THE AMOUNTS OF ALL OTHER GOODS CONSUMED

MARGINAL UTILITY

MARGINAL UTILITY IS THE RATE OF CHANGE OF TOTAL UTILITY CAUSED BY A SMALL GIVEN CHANGE IN THE QUANTITY OF A COMMODITY Mu = Tu / Q WHERE, Tu = TOTAL UTILITY Mu = CHANGE DUE TO ONE ADDITIONAL UNIT CONSUMED Q = QUANTITY OF GOODS

LAW OF DIMINISHING MARGINAL UTILITY

THE LAW OF DIMINISHING MARGINAL UTILITY STATES THAT: AS MORE OF A GOOD OR SERVICE IS CONSUMED DURING ANY GIVEN TIME PERIOD, ITSC MARGINAL UTILITY DECLINES, HOLDING THE CONSUMPTION OF EVERYTHING ELSE CONSTANT

ASSUMPTIONS

THE UNITS CONSUMED ARE HOMOGENEOUS THE TASTES OF THE CONSUMER REMAIN UNCHANGED DURING THE PROCESS OF CONSUMPTION THERE IS NO TIME GAP BETWEEN THE CONSUMPTION OF THE TWO UINITSOF THE COMMODITY

ELASTICITY OF DEMAND

ELASTICITY REFERS TO THE RATIO OF THE RELATIVE CHANGE IN A DEPENDENT VARIABLE TO THE RELATIVE CHANGE IN AN INDEPENDENT VARIABLE ELASTICITY IS THE RELATIVE CHANGE IN THE DEPENDENT VARIABLE DIVIDED BY THE RELATIVE CHANGE IN THE INDEPENDENT VARIABLE

WHY STUDY ELASTICITY?

PRICE FIXATION UNDER MONOPOLY & IMPERFECT COMPETITION ECONOMIC / TAXATION POLICIES OF THE GOVERNMENT DETERMINATION OF REWARDS FOR FACTORS OF PRODUCTION DETERMINATION OF TERMS OF TRADE & RATE OF FOREIGN EXCHANGE

DETERMINANTS OF ELASTICITY OF DEMAND

NATURE OF THE COMMODITY AVAILABILITY OF THE SUBSTITUTES MULTIPLE USES OF THE PRODUCT DEFERRED CONSUMPTION POSITION OF A COMMODITY IN THE CONSUMER BUDGET

DETERMINANTS OF ELASTICITY OF DEMAND

TIME FACTOR
HABIT PRICE RANGE INCOME GGROUP

ELASTICITY TYPES
ELASTICITY COULD BE : PRICE ELASTICITY INCOME ELASTICITY CROSS ELASTICITY PROMOTIONAL ELASTICITY

PRICE ELASTICITY

IT IS THE RESPONSIVENESS OF QUANTITY DEMANDED OF A GOOD TO CHANGES IN THE PRICE OF THE GOODS, OTHER THINGS BEING HELD EQUAL Ep=RELATIVE CHANGE IN QTY RELATIVE CHANGE IN PRICE

PRICE ELASTICITY TYPES

UNITY ELASTICITY HIGH ELASTICITY PERFECTLY ELASTIC LOW ELASTICITY ZERO ELASTICITY

INCOME ELASTICITY

IT IS THE % CHANGE IN THE DEMAND FOR A PRODUCT DIVIDED BY THE % CHANGE IN THE INCOME OF THE CONSUMER, HOLDING / PROVIDED OTHER THINGS REMAING UNCHANGED Ei = % CHANGE IN PRODUCTDEMAND % CHANGE IN CONSUMERS INCOME

INCOME ELASTICITY TYPES

ZERO INCOME ELASTICITY NEGATIVE INCOME ELASTICITY UNITARY INCOME ELASTICITY INCOME ELASTICITY OF DEMAND GREATER THAN UNITY INCOME ELASTICITY OF DEMAND LESS THAN UNITY

CROSS ELASTICITY

IT REFERS TO THE CHANGE IN DEMAND OF THE PRODUCT X TO PRICE CHANGE FOR PRODUCT Y IT IS MEASURED IN % CHANGE IT IS MEASURED AS FOLLOWS: ExPy=% CHANGE IN DEMAND FOR PRODUCT X
% CHANGE IN THE PRICE OF PRODUCT Y

CROSS ELASTICITY

CROSS ELASTICITY MAY BE EITHER INFINITE ZERO OR NEGATIVE