Demand analysis

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Demand analysis
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Demand analysis in contrast to other Econometric's notions is considered on both theoretical and empirical sides for a long time because the empirical analysis of consumer behavior and the theory of consumer behavior has always held a central position in econometrics. It is a result of practical problems in explaining demand data (Deaton A. 1986).

"Demand analysis is a small subset of Econometrics, referring largely to the study of commodity demands by consumers, most usually based on aggregate data but occasionally, and more so recently, on cross-sections" (Deaton A. 1986).

The role of demand analysis

The market environment is permanently connected with internal environment of the company. It is essential to make an analysis in order to define the company's action ways. An accurate analysis is necessary and has both a complex explorative role as well as a check-up and control role (Neamtu L. 2011).

Demand is one of the most analyzed and the most frequently considered concept in current economic expression. The demand theory (together with the supply theory) is the basis for development of some correlations between the demand and the strategic and policy choices of companies (Neamtu L. 2011).

Theory of consumers' demand

The researches on demand have led to the development and structuring the theory of consumers' demand. The theory of consumer behavior has given construction and language for data analysis and model formulation (Deaton A. 1986). We can distinguish for example Bandwagon, Snob and Veblen effects which categorize specific customers' activities into groups. Observing customers' activities and drawing conclusions help in making appropriate decisions (Leibenstein H. 1950).

There are also some different indicators such as the analysis of the consumption function and of durable goods, the choice over qualities, and the connections between demand analysis and welfare economics. These are several indicators using in still developing demand analysis (Deaton A. 1986).


Author: Joanna Trąbka