Demand Analysis


Demand is one of the crucial requirements for the existence of any business firm. Firms are interested in their profit and sales, both of which depend partially upon the demand for the product. The decisions, which management makes with respect to production, advertising, cost allocation, pricing, inventory holdings, etc. call for an analysis of demand. While how much a firm can produce depends upon its capacity and demand for its products. If there is no demand for a product, its production is unworthy. If demand falls short of production, one way to balance the two is to create new demand through more and better advertisements. The more the future demand for a product, the more inventories the firm would hold. The larger the demand for a firm’s product, the higher is the price it can charge.

Demand analysis seeks to identify and measure the forces that determine sales. Once this is done the alternative ways of manipulating or managing demand can easily be inferred. Although, demand for a firm’s product reflects what the consumers buy, this can be influenced through manipulating the factors on which consumers base their demands. Demand analysis attempts to estimate the demand  for a product in future, which further helps to plan production based on the estimated demand.




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