Demand and Demand Determinent

Demand Concept, Business Economics-MBA,M.Com
BEDADURI RAMAMURTHY, Associate Professor, GVIC-Madanapalli, brmurthy.mba@Gmail.Com. Page 1
Demand
The concept of demand is a critical factor to success of the business and development.
Products and/ or services are purchased and consumed by the desire and wants to the human
beings. This fulfilling we consumed different Products/ services in different price or quantity or
Time. This are changing from one to others, time period and Places. Some of them prefers to
engineering and some them prefers non engineering coerces it is effected to the person desires.
Some preferred to travel in air-condition train and some of them avoiding air- condition train it is
rerating to the person wants. Generally human being tolled demand is a scarcity of consumption
variables; it is not acceptable present economists. Demand for product implies below concepts:
A). desires to buy it,
b). willing to Pay for it,
c). Ability to pay for it, and
d). Given Particular Time and Price.
The Above first three of them Expressing Consumer Desire and Last concept Expressing
Consumer want. In Economic terms desire and want are broad concepts it implies demand of the
product
Demand definition
The demand for anything at a given price is that amount of it, which will be bought at
time at the price. Benham
The demand for a thing is a schedule of the amount that would be willing to purchase at
all possible price at any one instant of time. Prof Meyers
By demand we mean the quantity of a commodity that will be purchased a particular
price and not purely the desire of a thing. Hansen

“Demand we mean that various quantities of given commodity or services which
consumers would buy in one market in a given period of time at various price or at various
income or various prices of related goods”. Bober
Demand means an assortment of quantities of goods that would be purchased particular
time period at a choice of price in a given market. Hibdon
X, y and z were Purchased a cars but x is not traveled and utilized it, he is holding in his
home only for social states. Hear x don’t have a desire to travel in to the car. Y is using a car
regularly with help of fuel. Y utilization of car is supporting to the fuel demand, sometimes fuel
price is rising more than 50% in the actual cost. Y is not paid fuel cost willingly, in this type of
fuel or product or services demand is sufficient. Z is purchased a car through EMI facility in
hypothecation, but he fail to pay the EMI. Z doesn’t have a Purchasing capability for car. In z
case demand is not supporting to the car. The above three factors identified and fulfilling then
only we called Product demand.
Demand function
Demand function is expressing mathematical relation the relation between the quantities
of demand at their determinants factors. The demand function is expressed two ways; there are
individual demand function and market demand function.
Individual demand function is a function of mathematical expression of the Product and/
or services demanded at different price levels, remaining same.
The individual demand function D = F (p)
Hear
D is quantity of demand and
P is Product Price
Market demand function is a mathematical expression of the product and/ or services
demanded at different demand determinants affected in same time and same market.

Demand function is D = f (p),(F p), (Sp), (Cp), (Cp), (C i), (Ch)……..Ext…..
Hear
Quantity of demand is D
Product Price is (p)
Future price Expectation (F p)
Substitution Product Price is (Sp)
Complimentary Product Price is (Cp)
Change in income is (C i)
Change in habit is (Ch)
Demand Determinants Classification
The demand determinants are classified based on the Product/ services demand. This
demand determinants are is classified different categories like Product/ Services Utilization,
customer status, Product Price, Producers Promotion tools and Producer Consumption. Each
classification is effected from different factors in their circumstance.
1. Demand in the Market
Generally we are observing product/services in the market at different places and time
differently. This differentiation is effected from the different factors individually or two or more
Classification
of Demand
Determinants
Demand in the
Market
Product/
services
utilization
Consumer
status
Producer
Consumption
Sales
Promotion
tools
Product Price

at a time. Generally demand in the market is identified some factors like Socio Economic Status
of the market, Population of the market, Sex ratio of the population and Availability of credit.
Socio Economic Status of the market
The customers are living to the society; it is differing from developed, developing and
Un-developed nations. The developed nation’s customer’s perching poverty is high comparing t
o the other. Customer purchasing power is depending on the economy of the market.
Population
Nation product demand is depending on the nation population. Homogeneous and need
and wants quantity demand is depending on the population. Garments are requiring to the people,
if market have huge population quantity consumption is high. India and china consumption of
quantity is high comparing to the Vatican City.
Sex ratio of the population
General consumption of the products/ services is differed from men and women like
cosmetics. The population is comparing to the men and women are different to the one market to
other market. Ultimately quantity of demand is different one market to other market. If women
are less in the market some quantity of consumption is low. It is affected to the market demand.
Availability of credit
Most of the people are living to the more desires but their income standard is low, this
people are having some despairs like own house, car, jewelers and homogeneous products. This
people are required to financial assistance to fulfilling their despairs. This people are purchased
quantity/ services through credit basis. Present most of the peoples are purchased a car or/ and
house through financing (EMI).
2. Product/ services utilization
Product demand crated through Product and/ or services utilization. This product is
demand is determined by the nature of product consumption, like Durable Demand, Perishable
demand, Autonomous Demand, Derived Demand, Short run demand and Long run demand.

Durable products utilization
Durable product or/ and services are consumed demand is depending on the quantity
performance. Education institution services are taken once in a life, it is helpful for endeavors no
need to required same course again in the life. This type of services demand is depending on the
consumers’ priority or availability.
Perishable product utilization
The perishable goods are regular usages products like food related products; this type of
product is mostly preferred to the fresh products because of unpreserved products like milk,
vegetable ext... Perishable goods consumption is reputedly using to the customers, this product
demand is available regularly in the market capability.
Autonomous product utilization
Autonomous demand is product demand, this products are consuming directly without
help of other product. This Product is functioning to the independently to fulfilling consumer
needs. Regular usage independent products are shelter, cloths, ext… The autonomous products
are more requirements in to the day to day human being life.
Derived product utilization
Derived demand is linkage of two products consumption. This products consumption is
depending on the other product. One product demand is depending on the other product
performance. Agricultural land is depending on water and climate, car and petrol.
Short run product utilization
Human being consumptions of the products are different and usage of the products are
differed from one two others. Some products are using short period only like fashion goods,
umbrella, rain coat ext… this type of goods are rising demand short period, like seasonal are
occasional days or celebrations days only.
Long run products utilization
Human beings are using some products and/ or services long period like food related
goods, producer goods, this product or/and services are required continuously and day to day
human being life. These types of goods are having long term demand in the market.

3. Consumer status demand
Consumer means end user of the product or/and services. “Consumer is the king” has
become reality of realization in the new economy. Today business promoters or managers were
concentrating to know the consumer attitude and consumption. Consumer priority of the
consumption of the product is changing continuously because of number of factors are
influencing. The consumer consumption changing factors are Change in income, Change in
habit, Consumer age, Change in level of taxation, Availability of credit, Rate of interest and
transaction, Priority for wither condition and Demonstration Effort.
Change in income
Consumer income is one of the demand determined factor. The consumer consumption is
depending on income, it is effected the consumer demanded a given product. Consumers
purchasing Power affected by per capital income or gross National Product., if income status
changes simultaneously consuming quantity of demand also changing. Generally income is
affected in four ways; there is Positive reaction and Negative reaction.
 Consumer income increases, Quantity of Demand also increases.
 Consumer income increases, quantity of demand decreases.
 Consumer’s income decreases, quantity of demand also decreases.
 Consumer’s income decreases, quantity of demand decreases.
Consumer income is affected by the Normal goods and Inferior goods. Normal goods
have positive relation income and quantity of Demand (Income and Demand both increases).
Inferior goods have negative relation on income and quantity of demand (Income and Demand
both Fall down).
Change in habit
Consumer consumption of the quantities is changing some times, because of consumer
habit. The consumer habit is changing from x product from y product, demand of the x product is
increasing and y product demand is reducing simultaneously.

Consumer age
Consumer usage product is depending on the age priority. Most of the consumers are
given priority for fashion comparing to the youth and old age people. Youth people are ready to
use in new model garments and other things comparing to other age peoples.
Level of taxation
Present days Taxation is one of the revenue source of state and central government, it is
also effecting to the product price and consumers consumptions. Generally taxes are imposed by
government in two ways there are indirect tax and direct tax. Indirect tax imposed by the
product and services, it’s effected by the product price. High product price is problem to the
common man to consuming product. The direct tax imposed by government on income, wealth,
ext. The consumers are trying to reducing tax payment, through purchasing or investing tax
exemption investment Products like insurance plans and National Saving plans.
Rate of interest and transaction
Effective Financial plan is supporting to the credit transaction, when it is facing scarcity
of finance. Consumers are also living more desires but limited income. Now consumers are
building financial plan effectively and fulfilling their desire with help of financial institutions.
Consumers are purchasing their desire products through credit transaction but some of them not
preferred because of high interest rate and critical transaction process.
Priority for weather condition
The consumers prefer products are depending on the weather condition, it is changing
seasonal. Some of the products are supporting to the human being weather problems. Based on
that some of the product demands are accruing from weather conditions.
4. Product Price
The product demand consideration, one of the factors is consumer willing to pay the
product price. The producers consider this element, before fixing the product price. Most of the
consumers are preferred to the Product price. It is affected from product demand through
different factors like Product Price, Substitution Product Price and Complimentary Product Price.

Product Price
The consumer product preferences considered different factors based on wants. The price
is one of the factors to consider product priority decision taken by the consumer. Generally
consumers prefer by minimum price maximum quantity. The Most of the firms are delivering
products at consumer conveniently. In general product price and quantity of demand has inverse
relationship. Producers fixing product price by nature of the product, normal products set by the
minimum price and superior product set by the high price.
Substitution Product Price
Substitution means replacement of product for satisfying consumer objectives. Present
scenario competition is high through globalization, each product having substituted product.
Substitution or replacement products are soft drinks, mobile phones, televisions Ext. The
consumer is purchasing product before comparing to the substituted product price, and quality,
prefer to the product in conveniently. Product demand is depending on the substituted product
price also.
Complimentary Product Price
The complimentary product means different products, those goes together with one
objective consideration. Like Coffee powder, Milk and Sugar. The price of the coffee depending
on the above three elements cost, if one or more elements cost increase is effected by the coffee
price. The coffee powder cost increases simultaneously coffee price increase, it affected by the
consumer demanded decision of the coffee or tea.
Future product price expectation
Most of the consumers’ products purchased in advance; they are assuming product price rise
in future. Even investors are purchased through market estimation of different financial
commodities, like Bonds, debentures, gold, real estate properties and shares.
5. Sales Promotion tools
Change in Advertisement
Most of the companies are using sales promotional tools through advertisement. The
companies changing advertisement or brand ambassador is affected to the quantity of sales or
quantity of demand.

6. Producer Consumption
Resources demand is created through consumption this consumption is depending on the
consumers, firm and industry.
Individual demand
Individual demand is demand for quantities of consumed at a given different time and
price levels individual person. The persons consumed quantity is depending on the price factor in
general conditions, it is functioning reverse performance.
For observing customer-1 and gaff the quantity of the Product price is Rs 10/- and Rs 20/-
the customer is consumed 25 quantity. The quantity price is changing Rs 30/- the demand of the
Product is 20. The quantity price is Rs 40/- the demand of the product is 15 and quantity price is
Rs 50/- the demand of the quantity is 10. When the price is changing the demand of the quantity
is changing.
Factors Influencing Individual demand
Price of the product
Individual Income
Taste and Habit
0
10
20
30
40
10 20 30 40 50
DemandoftheQuntity
Price of the Quntity
Customer-1 demand
0
20
40
60
DemandoftheQuntity
Customer-2 demand
quntyty of
demand

Relative Product Performance
Consumers Expectations
Advertising Effect
Segmentation demand
Segment demand is refer to the selected group of people consuming specified quantity at
different Price levels. Here selected group of
people are regional, sex, religion,
occupations/ profession, nation ext… this
factors are effected to the product demand
differently one two others. Consumed
Products are changing one nation to other
nation or regional ext… For observing
engineers segment quantity of consumption
is different from one customer and other
customers. At the price level Rs 10/-, the customer -1, 2 and 3 are demanded 25 quantities.
Quantity Price level Rs 20/-, demanded at 25, 30 and 25 quantities respectively.
The quantity Price level Rs 30/-, demanded at 20, 35 and 25 quantities. The quantity price
is Rs 40/-, demanded 15, 40 and 25 quantities. The quantity of price Rs 50/-, customers
demanded at 10, 40 and 25 quantities. All customers prefer their quantity demand in differently
at different price level. We observing all engineering customers demand is called engineers
segment demand at given price level.
0
50
100
150
10 20 30 40 50
Administater
sigmentation
S. No.
Price
level
Engineers quantity of
Consumed Total
C-1 C-2 C-3
1 10 25 25 25 75
2 20 25 30 25 80
3 30 20 35 25 80
4 40 15 40 25 80
5 50 10 40 25 65
Advertising Effect
Segmentation demand
0
50
100
10 20 30 40 50
Others Sigmentation
0
20
40
60
80
100
10 20 30
S. No.
Price
level
Consumed Total
C-1 C-2 C-3
1 10 25 25 25 75
2 20 25 30 25 80
3 30 20 35 25 80
4 40 15 40 25 80
5 50 10 40 25 65
Advertising Effect
Segmentation demand
30 40 50
S. No.
Price
level
Consumed Total
C-1 C-2 C-3
1 10 25 25 25 75
2 20 25 30 25 80
3 30 20 35 25 80
4 40 15 40 25 80
5 50 10 40 25 65

The engineers’ segmentation is given quantity of demand different price level at different
quantity. The quantity price level Rs 10/-, given 75 quantity of demanded. The quantity price
level Rs 20/-, 30/- and 40/-, given 80 quantities or demanded. Individual demand is different
form market demand in given price sometimes.
For observing other segmentation (administration and others segmentations) segment it is
changing from one to others quantity of demanded. It is not a condition to demanded quantity
performance different or same. Sometimes it may be different or same in segmentation
performance.
Market demand
The market demand is a total horizontal of individual demand from the quantity
consumed at given price level. It is affected from the group of peoples consumed
product/services at different price level. The groups of people are covered by the number of
consumers or/and available different segmentation people in the market.
S. No
Price
Levels
Quantity sold
Total
Engineers Administrators Others
C-1 C-2 C-3
Tot
al
C-4 C-5 C-6 Total C-7 C-8 C-9 Total
1 10 25 25 25 75 35 40 25 100 35 35 20 90 265
2 20 25 30 25 80 30 35 25 90 35 30 20 85 255
3 30 20 35 25 80 25 30 20 75 30 25 20 75 215
4 40 15 40 25 80 20 25 15 60 25 20 20 65 180
5 50 10 40 25 65 15 10 10 35 20 15 15 50 130
0
20
40
60
80
100
10 20 30
Engineers sigmentation
performance.
Market demand
S. No
Price
Levels
Quantity sold
Total
C-1 C-2 C-3
Tot
al
1 10 25 25 25 75 35 40 25 100 35 35 20 90 265
2 20 25 30 25 80 30 35 25 90 35 30 20 85 255
3 30 20 35 25 80 25 30 20 75 30 25 20 75 215
4 40 15 40 25 80 20 25 15 60 25 20 20 65 180
5 50 10 40 25 65 15 10 10 35 20 15 15 50 130
40 50
Engineers sigmentation
0
50
100
150
10 20 30
Administater sigmentation
performance.
Market demand
S. No
Price
Levels
Quantity sold
Total
C-1 C-2 C-3
Tot
al
1 10 25 25 25 75 35 40 25 100 35 35 20 90 265
2 20 25 30 25 80 30 35 25 90 35 30 20 85 255
3 30 20 35 25 80 25 30 20 75 30 25 20 75 215
4 40 15 40 25 80 20 25 15 60 25 20 20 65 180
5 50 10 40 25 65 15 10 10 35 20 15 15 50 130
40 50
Administater sigmentation

For observing to the Market demand is a combination of all customers or all
segmentation. Sometimes it may be equal to the any customer or segmentation in quantity of
demand curve from graphic representations. The administrative Market segmentation and others
segmentation is similar in the market demand curve from graphical representation but customers
prefer demanded quantity is defer from market demand.
Factors Influencing Segmentation Demand
Factors influencing Market Demand
Distribution of Income or Wealth in the Community
Community Common Habit
Standers of People
Number of Byers in the Market
Age Structure and Gender Factor of the People
Level of Taxation
Climate or weather Conditions
Consumers Psychology
Firm consumption
The firm consumed quantity is called firm consumption. If the firm consuming more
quantity the quantity of demand is high or less consumed the quantity of demand is less.
0
20
40
60
80
100
10 20 30 40 50
Others Sigmentation
0
100
200
300
10 20 30 40 50
Market Demand

Industry Demand
Industry demand means all forms consumed quantity is called industry consumed. If all
firms are consuming more quantity the demand is high or lee quantity is consumed the demand is
less.
Reference
1. Atmanand, Managerial Economics,Paper-2, School of distance Education, Bharathiar
University, Coimbatore, Excel Book Private limited, 2007
2. www. Extension.iastate.edu/agdm/May 2007

Demand and Demand Determinent

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