Demand Analysis
CHAPTER 2A
DEMAND ANALYSIS
1. Introduction:
• Demand for goods and services constitutes one side of the product market ; supply of goods and services forms the other.
• If there is no demand for a good, there is no need to produce that good.
• If the demand for a good exceeds its supply, there may be need to expand production.
• Production generally takes time and so one has to know the likely demand for a relevant product at a future data to plan its production properly.
• Thus a clear understanding of demand is imperative for any firm.
• Demand analysis seeks to identify and analyse the factors that influence the demand.
2. Meaning of Demand:
• Demand in economics means effective demand.
• Effective demand is one which meets with all its 3 crucial characteristics. They are
i) Desire to have a good ii) Willingness to pay for that good iii) Ability to pay for that good.
• In the absence of any of these 3 characteristics there is no demand.
• Demand for a good depends on several factors and varies as any one or more of these factors change.
• The two important determinants of demand are own price and income.
• Demand is usually defined as a schedule which shows various quantities of a product which one or more consumers are willing and able to purchase at each specific price in a set of possible prices during a specific period of time.
• For example, demand for milk by a household per month may be as follows
Milk price Milk demand Rs per litre (litres) 25 20 22 32 20 45 17
DEMAND ANALYSIS
1. Introduction:
• Demand for goods and services constitutes one side of the product market ; supply of goods and services forms the other.
• If there is no demand for a good, there is no need to produce that good.
• If the demand for a good exceeds its supply, there may be need to expand production.
• Production generally takes time and so one has to know the likely demand for a relevant product at a future data to plan its production properly.
• Thus a clear understanding of demand is imperative for any firm.
• Demand analysis seeks to identify and analyse the factors that influence the demand.
2. Meaning of Demand:
• Demand in economics means effective demand.
• Effective demand is one which meets with all its 3 crucial characteristics. They are
i) Desire to have a good ii) Willingness to pay for that good iii) Ability to pay for that good.
• In the absence of any of these 3 characteristics there is no demand.
• Demand for a good depends on several factors and varies as any one or more of these factors change.
• The two important determinants of demand are own price and income.
• Demand is usually defined as a schedule which shows various quantities of a product which one or more consumers are willing and able to purchase at each specific price in a set of possible prices during a specific period of time.
• For example, demand for milk by a household per month may be as follows
Milk price Milk demand Rs per litre (litres) 25 20 22 32 20 45 17