WHAT IS DEMAND ANALYSIS

              Demand Analysis

The stability and growth of business is linked to the size and structure of demand. Without a clear understanding of consumer's behavior and a clear knowlf'dge of the forces behind demand, the firm is handicapped in its attempt towards profit planning, sales forecasting or any other business strategy planning. Demand, therefore, is one of the crucial requirements for the production of a product. For example, if there is no demand for a product, its production is unwarranted and, on the other hand if the demand is high for the product, it can charge a high price. In this chapter we shall discuss the meaning of demand, types of demand, determinants of demand, demand function. Finally, we shall discuss the concept of elasticity.

Meaning of Demand

According to economists, the term 'demand' refers to (a) the desire to have possession and (b) the willingness to pay for that possession. Thus demand in the economists' new does not me~n the wants, desire or need for people since these may not be backed up by the ability to pay. But it is the amount the consumers are willing to pay at a given price over a given period of time. To understand the meaning of demand better let us consider the willingness to possess a car. Everyone has a desire to own a car but it does not create a demand. A miser's desire to possess a car is not demand; for he does not have the necessary will to pay for a car. Similarly, a poor man's will to possess a car is not a demand for he lacks the ability to purchase the car. We can also consider a person who possess both will and purchasing power to pay for the car but it does not create demand for that commodity if he does not desire to have a car.

Thus demand for any commodity is the desire for that commodity backed by willingness as well as ability to pay for it and is always defined with reference to a particular time and given values of variables on which it depends