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.