Market demand

Market demand
See also

Market demand is a term that describes the relationship between the customer and the market itself, in which he makes decisions about making purchases. When this mechanism is working properly, the customer is highly satisfied with every feature of the product, that he bought (Y. K. Dwivedi, M. Shareef, S. K. Pandey, V. Kumar 2013, p.2). In other words, market demand is a total demand for a particular good or service, that is taking place during the specific period in a specific geographical area (Ch. Doyle 2011, p.283).

Types of market demand

It is possible to single out three types of market demand (Ch. Doyle 2011, p.283):

  • historical
  • current
  • future

historical demand is the easiest to determine from this tree. This task is considered to be the hardest of all when analyzing market demand. That is because, there are many companies, that are presenting us with new developments. Those companies are usually failing with estimating the market(Ch. Doyle 2011, p.283).

current demand is estimated by the total amount of buyers multiplied by the statistic quantity/value of the potential purchase. The hardest thing to do, when calculating this indicator is measuring the number of buyers, that are present in each market segment. The most common method is dividing them by the geographical territories. Another thing to estimate is establishing competitors, their sales volumes, relative market share, relative growth rate (Ch. Doyle 2011, p.283).

future demand is the most difficult to establish. The main reason for that is the fact that not many markets present any degree of stability and predictability that allows evaluation of future demand built on historical demand. Forecasts usually consist of an aggregate vision of macroeconomic forecasts (GBN, interest rate, etc.), company-specific forecast and industry-specific forecast (Ch. Doyle 2011, p.283).

The law of market demand

The law of demand doesn't apply to a particular household, but a seriously large amount of households. As an example: the group of households in Poland (W. Hildenbrand 2014, p.4). The classic relation between the periods and prices of all relevant commodities, that is easy to observe in the formula of market demand is that (W. Hildenbrand 2014, p.4):

  • a raise of the price of goods from one period to another is associated with a decline of demand for that specific good.
  • a decline of the price of goods from one period to another is associated with a rise of demand for that specific good.

References

Author: Witold Urjasz