Swot Analysis of Demand

8/9/2019 Swot Analysis of Demand

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` Presented by:-

Susmita Jha


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` The demand for anything, at a given price, is the amount of it,

which will be bought per unit of time, at that price.

` By demand we mean the various quantities of a given

commodity or service which consumers would buy in one market

in a given period of time at various prices.

` Requisites:

a. Desire for specific commodity.

b. Sufficient resources to purchase the desired commodity.

c. Willingness to spend the resources.

d. Availability of the commodity at

` (i) Certain price (ii) Certain place (iii) Certain time.


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` The law of demand states that higher the price,

lower the demand, and vice versa, other things

remaining the same.

` Its an inverse relationship between price andcommodity.

Exceptions to the law of demand are

Giffen goods.

Conspicuous consumption.


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0

510

1520

25

3035

40

0 2000 4000 6000 8000 10000 12000 14000

Quantity

Price

Old demand New demand Supply

`An increase indemand shifts

the demandcurve to the right.

` Equilibrium priceincreases.

`

Quantitydemandedincreases.


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0

5

10

15

20

25

30

35

40

0 2000 4000 6000 8000 10000 12000 1400

Quantity

Price

Old demand New demand Supply

` A decrease indemand shiftsthe demand

curve to theleft.

` Equilibriumprice falls.

` Quantitydemanded falls.


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1. Individual demand2. Market demand

3. Income demand

- Demand for normal goods (price ve, income +ve)

- Demand forinferior goods (eg., coarse grain)

4. Cross demand

- Demand for substitutes or competitive goods (eg. tea & coffee, bread and rice)

- Demand for complementary goods (eg., pen & ink)

5. Joint demand (same as complementary, eg., pen & ink)

6. Composite demand (eg., coal & electricity)

7. Direct demand (eg., ice-creams)

8. Derived demand (eg., TV & TV mechanics)

9. Competitive demand (eg., desi ghee and vegetable oils)

10. Demand of unrelated goods


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Price

Determinants of

DemandIncome

Number of

Buyers Prices of other

goods

Tastes

Expectations

about future

Quality

Supply?


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` Price of the commodity Normally there is an inverse relationship

between the price of the commodity and the quantity demanded. (Px)

` Income of the Consumer Determines the purchasing power of the

consumer. Generally, there is a direct relationship between the income

of the consumer and demand. (Y)

` Consumers taste and preference (T)

` Price of related commodities (Pr)

` Consumer Expectation (expected change in price)

` Distribution of income

` Size and composition of population

` Other Factors e.g., natural calamities

Qdx = f (Px, Pr ,Y , T, D)


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` Demand Schedule: a tabular presentation

showing different quantities of a commodity

that would be demanded at different prices.

Types of Demand Schedules

Individual Demand ScheduleMarket Demand Schedule

Shows various quantities of acommodity that would bepurchased at differentprices by a household.

Shows the various commoditiesthat would be purchased atdifferent prices by all thebuyers of that commodity. Itis composed of the demandschedules of all the individuals

purchasing that commodity.


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` Availability of substitutes

` Postponement of consumption

` Proportion of expenditure (needles: inelastic; TV: elastic)

` Nature of the commodity (necessity vs. luxury)

` Different uses of the commodity (paper vs. ink)

` Time period (elastic in the long term)

` Change in income (necessaries: inelastic)

` Habits

`

Joint demand` Distribution of income

` Price level (very costly & very cheap goods: inelastic)


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` Price elasticity of demand

` Income elasticity

` Cross price elasticity

` Advertising elasticity


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Elastic Demand or more than 1 When quantity demandedresponds greatly to price changes

Inelastic Demand or less than 1 When quantity demanded

responds little to price changes.

Unitary Elastic When quantity demanded responds equally to

the price changes. Perfectly inelastic or0 elastic demand

Perfectly elastic or infinite elastic demand

Economic factors determine the size of price elasticity for

individual goods. Elasticity tends to be higher when the goodsare luxuries, when substitutes are available and when

consumer have more time to adjust their behavior.


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` Income elasticity may be defined as the degree of

responsiveness of quantities demanded to a given

change in income.

`

Properties luxury goods eI > 1

necessity 0 < eI < 1

inferior goods eI < 0


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` Zero income elasticity

` Negative income elasticity

` Positive income elasticity


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` Cross price elasticity is responsiveness of demand

of a good to changes in another goods price

` Cross elasticity of demand measures the

proportionate change in the quantity demanded ofa particular commodity in response to a change in

the price of another related commodity.


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` Properties ec > 0: substitute

ec = 0: independent

ec

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Swot Analysis of Demand