Market Demand

Posted in Marketing and Strategy Terms, Total Reads: 376
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Definition: Market Demand

In a market over a specific time period the aggregate demand of all customers for a particular product. It measures the willingness of a buyer to buy the product. It captures the buying side of the market. According to the laws of demand buyers are willing to purchase larger quantity at smaller price. Thus it helps to maximize sales revenues by setting optimal pricing levels.


The market demand curve focuses on primarily on two aspects demand price and the quantity demanded. Which often holds the relationship as quantity demanded at lower prices is higher than quantity demanded at higher prices. It is affected by 5 variables: 1.Buyers preference, 2. Expectation of the Buyers, 3. Income of the Buyer, 4. No of buyers present in the market, 5.Prices of substitute or complement goods. Although a change in demand price causes changes in demand quantity, but a change in any 5 of the determinants can led to shift or repositioning of the market demand curve.


Types of demand:

Effective Demand: Willingness and an ability to pay often drives the customers desire to buy a particular product.

Latent Demand: When the customer lacks the purchasing power but has a willingness to buy the product.


Conditions of demand:

1. Substitutes act as replacements thus causing changes in the price. For example, a rise in price of petrol will make the consumers switch to other alternatives such as diesel or LPG.

2. A price change of complement which is brought with the main product can also cause variation in demand. For example: An increase in price of pizza can prevent purchase of finger chips.

3. Income is an important factor as people tend to buy more when income goes up and there is a decrease in the demand, when incomes fall.

4. Many times advertisements acts to change the customer references and taste.

5. Rate of interest charged by the lender often led to changes in demand pattern.

 

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