Class – 04 (11-01-2024)
Unit – B
Marketing Research
Demand and Supply
Meaning of Demand
The demand is the number of consumers willing to purchase goods or services at a
certain price. Supply is the other side of demand. Businesses that accurately meet
demand with their supply of products or services greatly benefit in profits and
heightened brand awareness.
Demand and Supply
Effective Demand
Effective demand involves these things..
Desire
Ability to Buy
Willingness to pay for it
At the Given price and time
Demand and Supply
Determinants of Demand
Demand and Supply
Supply and Demand
If demand is the quantity consumers are willing to buy at a given price, supply is the
quantity producers are willing to offer.
The price of goods and services is determined by the supply in the market and the
demand for it.
Demand and Supply
Types of Demand
Individual Demand
Market Demand
Composite Demand
Price Demand
Income Demand
Direct and Derived Demand
Competitive Demand
Short term and Long term Demand
Demand and Supply
Types of Demand
Demand and Supply
Factor Influence Demand
Expectation of Price Increase Taste and Preference
Income Market size
Price Advertisement
Availability of alternatives Nature/Weather Effect
Complementary products Government/Tax Factor
Consumer preferences Availability of Credit
Demand and Supply
Factor Influence Supply
Labor and materials (which reflect their opportunity costs of alternative uses to supply
consumers with other goods)
The physical technology available to combine inputs
The number of sellers and their total productive capacity over the given time frame
Taxes, regulations, or additional institutional costs of production
Demand and Supply
Demand Function
Dx = f(Px, Pr, M, T, A, U)
Dx = Quantity Demand
F = functional relation
Px = Price of Commodity
Pr = Price of related commodity
M = Money Income
T = Taste and Preference
A = Advertisement Effect
Demand and Supply
Equilibrium Price
When the quantity of supply of goods matches the demand for goods, it is called the
equilibrium price.
Demand and Supply
Example
Quantity
Quantity
Price Demanded Surplus (Kg) Shortage (Kg)
Supplied (Kg)
(Kg)
100 5 50 45
90 12 41 29
80 18 35 17
70 22 28 6
60 25 25 0 0
50 34 22 12
40 41 18 23
30 47 14 33
20 50 9 41
10 55 5 50
Law of Demand
Law of Demand
Law of demand explains consumer choice behavior when the price changes. In the
market, assuming other factors affecting demand being constant, when the price of a
good rises, it leads to a fall in the demand of that good.
Law of Demand
Assumptions of Law of Demand
Income level should constant
Taste & Fashion should not change
Price of Other goods should remain constant
No new Subtitute for the commodity
Law of Demand
Assumptions of Law of Demand
Price Rise in future should not be Expected
No Change in Climate
No Change in Tax, Govt. Policies
No Change in Advertisement and Promotions
Law of Demand
Demand Curve & Schedule
Price per kg Demand in kg
100 4
80 6
Price
60 8
40 10
20 12
Quantity Demanded
Law of Demand
Exceptions of Law of Demand
Conspicuous Goods (Status Symbol Products)
Inferior Goods: Low Quality goods, related to income
Giffen Goods: Strongly Inferior goods (Given by Sir Robert Giffen)
Necessities of Life
Law of Demand
Exceptions of Law of Demand
Impulsive Purchase
Ignorance/Illusion Effect
Emergency Factor
Outdated Goods
Elasticity of Demand
Elasticity of Demand
The price elasticity of demand is the percentage change in the quantity demanded
of a good or service divided by the percentage change in the price. The price
elasticity of supply is the percentage change in quantity supplied divided by the
percentage change in price.
Elasticity of Demand
Elasticity of Demand
Type of Elasticity of Demand
Elasticity of Demand
Key Points
Price elasticity of demand measures how consumers react to a change in price.
There are five types of price elasticity of demand: perfectly inelastic, inelastic,
perfectly elastic, elastic, and unitary.
Price elasticity of demand can be calculated by dividing the percentage change
in quantity demanded by the percentage change in price.
Elasticity of Demand
Elasticity of Demand
If . . . It is Called . . .
Elasticity of Demand
Perfectly Inelastic
Demand Constant
=0
Change in Price
Elasticity of Demand
Perfectly Inelastic
Elasticity of Demand
Relatively Inelastic Demand
Few changes in Demand
<1
High Changes in Price
Elasticity of Demand
Relatively Inelastic Demand
Elasticity of Demand
If . . . It is Called . . .
Elasticity of Demand
Unitary Elastic
Changes in Demand
=1
Changes in Price
Elasticity of Demand
Unitary Elastic
Elasticity of Demand
Relatively Elastic Demand
High Changes in Demand
>1
Few Changes in Price
Elasticity of Demand
Relatively Elastic Demand
Elasticity of Demand
Perfectly Elastic Demand
High Changes in Demand
No Changes in Price =∞
Elasticity of Demand
Perfectly Elastic Demand
Elasticity of Demand
If . . . It is Called . . .
Demand Forecasting
Demand Forecasting
Demand forecasting refers to the process of predicting customer demand over a specific
period using historical data and other analytical information to get highly accurate
estimates.
Demand Forecasting
Objectives of Demand Forecasting
Demand Forecasting
Importance Demand Forecasting
Producing the desired output
Assessing the probable demand
Forecasting sales figures
Better control
Controlling inventory
Assessing manpower requirement
Ensuring stability
Planning import and export policies
Demand Forecasting
Factor Affecting Demand Forecasting
Nature of Goods
Level of Competition
Price
Change in Technology
Nature/Uncertainty
Population
Government Policies & Taxes
Demand Forecasting
Demand Forecasting
Steps for Demand Forecasting
Types and Methods of Demand Forecasting
Types of Demand Forecasting
There are mainly three type of Demand Forecasting..
Market
Time Level Firm Level
Level
Forecasting Forecasting
Forecasting
Types and Methods of Demand Forecasting
Market Level Forecasting
City Based Forecasting
Country Based Forecasting
Regional Forecasting
Rural/Urban Forecasting
Types and Methods of Demand Forecasting
Time Level Forecasting
Short-term Demand Forecasting
Long-term Demand Forecasting
Types and Methods of Demand Forecasting
Firm Level Forecasting
External macro level Demand Forecasting
Internal business level Demand Forecasting
Types and Methods of Demand Forecasting
Types and Methods of Demand Forecasting
Types of Forecasting
Active Demand Forecasting: The forecasting is done on the assumption that the firm
changes the course of its action. The prediction is done under the condition of favorable
future changes in the operations by firms.
Passive Demand Forecasting: It is a rare type of forecasting and mostly done by the
businesses which are stable and having very conservative growth plans. The forecast is
based on the assumption that the firm doesn’t change the course of its action.
Types and Methods of Demand Forecasting
Types of Forecasting
Short term Demand Forecasting: This forecasting is done for a shorter period of 3
months to 12 months.
Long term Demand Forecasting: When forecasting is carried out for a period of more
than 12 months, such forecasting is known as long term demand forecasting.
External Demand Forecasting: The forecasting carried out by a company’s research wing
or by outside consultants is known as external group forecasting.
Types and Methods of Demand Forecasting
Types of Forecasting
Internal Forecasting: It refers to the forecasting estimation by the operations of a
particular enterprise such as production group, sales group and financial group.
Macro Level Forecasting: In this, the broad market operations are analyzed and then
forecasting is carried out in macro economic environment.
Industrial Level Forecasting: This forecasting is prepared from the viewpoint of
managers and is related to an individual firm.
Types and Methods of Demand Forecasting
Types of Forecasting
Firm Level Forecasting: It means forecasting the demand for a particular firm's product.
For example, demand for Birla cement, demand for Raymond clothes, etc.
Product Line Forecasting: This forecasting is related to the product or products being
produced by the firm. It helps the firm to decide which of the products should have
priority in the allocation of the firm’s limited resources.
