Transcript SIZE 120KB
• Subject: Management Principles & Organizational behavior www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Introduction- Demand • Demand means a desire or wish to buy and consume a commodity or service. • But in economics a mere desire or wish does not constitute demand Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Introduction- Demand • The growth rate of over 25 percent in IT/ITES sector of India is leading to a tremendous demand of qualified IT professional • The demand supply gap of wheat in 2007 was 40 lakh tonnes • The India hydrocarbon Vision 2025 Report estimates that the demand for natural gas is expected to show a sharp rise in future. Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Demand • Demand is defined as that want, need or desire which is backed by willingness and ability to buy a particular, commodity, in a given period of time • Demand is effective desire, as it is backed by willingness to pay and ability to pay. Vels University www.velsuniv.org Executive Placement 2003 School of Management Studies – Striving towards Excellence BIM Demand Function D= f ( t, y, P, N, F, D, C, B) • D= Quantity of demand • T= tastes and preference of the consumer • P= price of substitute • N= Number of consumers • F= Expectation of future price rise • D= Distribution of income • C= Climate and weather • B= State of business Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Determinants of Demand Price of demand(-) Income of the consumer(+) ( Normal Goods & Inferior Goods) Price of related goods or substitute ( Substitutes & complements) Substitutes are goods that satisfy a similar need and can be used as replacement of each other. Complements are demanded jointly. Tastes and preferences Advertising Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Advertising facts: • A survey of rural consumers has shown an amazing finding that for most of the product categories surveyed, the consumers were not influenced by advertisements or promotions • 73% of respondent feel that promotion has not or moderate effect on buying various products, which included detergent powder, bathing soap, shampoo, hair oil, watches, tea, edible and bicycle. • 54% and 75%mof rural consumer give importance for soft drink and edible oil Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Advertisement is a wasteful expenditure. Do you agree? Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Determinants of demand Consumer’s expectation of future income and price Population Climate and Weather Growth of Economy Vels University www.velsuniv.org Executive Placement 2003 School of Management Studies – Striving towards Excellence BIM Types of Demand o Direct and derived demand Consumer goods: It is the commodity demanded for its own sake by the final consumer is called direct demand Capital goods: It is the commodity demanded for using as a raw material or intermediary purpose then it is called as derived demand Ex: New building, mobile accessories Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Types of Demand o Recurring and Replacement demand: Consumable demand have recurring demand; durable consumer goods are purchased to be used for a long time but they need replacement Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Types of Demand o Complementary and competing demand: Complementary demand: When one commodity is demanded to satisfy a single want, such demand is called as joint or complementary demand. Competing demand: Goods that compete with each other to satisfy any particular want are called substitute Vels University www.velsuniv.org Executive Placement 2003 School of Management Studies – Striving towards Excellence BIM Types of Demand o Individual and market demand: o Demand for an individual consumer is individual demand. o Industry demand is the demand for the product produced by all the firms in the industry. Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Law of Demand “The Law of demand states that people will buy more at lower prices and buy less at higher prices” Paul samuelson Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Law of Demand Law of demand can be understood with the following Price effect Substitution effect Income effect Law of diminishing marginal utility Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Law of demand Price effect: It explains why a fall in price results in rise in demand and vice versa. Example: Multiple use product like milk, electricity, coal or steel Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Law of demand Substitution effect: When price of a commodity falls, it becomes more easily affordable and thus more attractive to the consumer Income effect: Fall or rise in income has the effect on demand Law of diminishing marginal utility: As per Law of Diminishing Marginal utility, the utility derived from every next unit of a commodity consumer goes on falling. Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence The Law of Demand P P1 P A B P D1 2 Q1 Q2 Q CHANGE IN PRICE= change in quantity Vels University D2 Q CHANGE IN OTHER= change in demand www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence The Law of Demand P D1 D2 Q CHANGE IN OTHER= change in demand Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Demand Schedule and Demand Curve Demand Schedule: It is the list or tabular statement of the different combinations of price and quantity demanded of a commodity. Demand Curve: The demand curve shows the relationship between price of a good and the quantity demanded by consumers. Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Exceptions to the Law of demand Giffen Paradox: ( Inferior goods) Sir Robert Giffen, an economist, was the first to give an explanation to this situation. Ireland scenario Snob Appeal: (Veblen effect) In which consumer measures the satisfaction derived from their utility value, but by social status. Vels University www.velsuniv.org BIM Executive Placement 2003 School of Management Studies – Striving towards Excellence Exception of Law of Demand Demonstration effect: Demonstration effect is the influence on a person’s behaviour Future expectation of prices: (Panic buying) People purchase goods with the expectation that prices will rise more in the future. Goods with No substitutes: Insignificant use of the product Vels University www.velsuniv.org Executive Placement 2003 School of Management Studies – Striving towards Excellence BIM That is all about Demand………………………… Thank you Vels University www.velsuniv.org