Demand analysis is one of the most important areas in managerial economics because almost every business decision depends on expected demand.
Managers use demand analysis to decide:
In exams, always connect demand to decisions (price, output, inventory).
Demand means the quantity of a good that consumers are willing and able to buy at a given price, during a given period.
Important: demand has 3 parts:
Demand analysis is the study of:
Exam-friendly one-liner:
Common types:
Write 4–6 types with a small example for 3–5 mark answers.
Statement: Other things remaining constant (ceteris paribus), when price falls, quantity demanded rises; when price rises, quantity demanded falls.
Assumptions (brief):
Exceptions (write 3–4 with examples):
A demand schedule shows price and quantity demanded.
Example schedule:
A demand curve is downward sloping (generally).
Key determinants (write as points):
Managerial note: in real life, demand often changes due to multiple factors at the same time.
A demand function shows the relationship between quantity demanded and its determinants.
General form:
Access the complete note and unlock all topic-wise content
It's free and takes just 5 seconds
From this topic
Want is only a desire for a good or service, even if the person cannot purchase it. Demand is a want supported by willingness and ability to pay, and it is considered for a specific time period and price.
Example: Wanting a luxury car is a want, but it becomes demand only when the consumer has money and intends to buy it.
Determinants of demand (any six):
A change in these factors causes demand to shift.
Managerial economics is a stream of management studies which emphasises solving business problems and decision-making by applying the theories and principles of microeconomics and macroeconomics. It is a specialised stream dealing with the organisation's internal issues by using various economic theories.
Download this note as PDF at no cost
If any AD appears on download click please wait for 30sec till it gets completed and then close it, you will be redirected to pdf/ppt notes page.
Demand analysis is one of the most important areas in managerial economics because almost every business decision depends on expected demand.
Managers use demand analysis to decide:
In exams, always connect demand to decisions (price, output, inventory).
Demand means the quantity of a good that consumers are willing and able to buy at a given price, during a given period.
Important: demand has 3 parts:
Demand analysis is the study of:
Exam-friendly one-liner:
Common types:
Write 4–6 types with a small example for 3–5 mark answers.
Statement: Other things remaining constant (ceteris paribus), when price falls, quantity demanded rises; when price rises, quantity demanded falls.
Assumptions (brief):
Exceptions (write 3–4 with examples):
A demand schedule shows price and quantity demanded.
Example schedule:
A demand curve is downward sloping (generally).
Key determinants (write as points):
Managerial note: in real life, demand often changes due to multiple factors at the same time.
A demand function shows the relationship between quantity demanded and its determinants.
General form:
Where:
Simple linear demand (often used for estimation):
Movement along demand curve happens when price changes (other factors constant).
Shift of demand curve happens when other determinants change (income, tastes, substitute prices, etc.).
This is a very common 3-mark question.
Simple way to remember:
Demand forecasting is predicting the quantity of a product that will be demanded in the future.
Objectives:
Managers revise forecasts regularly as new information arrives.
Forecasting methods are broadly:
Used when past data is limited or for new products.
Used when historical data is available.
Exam tip: write 2–3 lines on each method, and mention when it is suitable.
A good forecasting method should consider:
No single method is best for all cases.
Demand function (easy diagram idea):
Qd depends on: Price + Income + Substitutes + Complements + Tastes + Ads + Expectations
Movement vs shift (mini table):
Forecast methods (quick table):
If these notes helped you, a quick review supports the project and helps more students find it.
Demand analysis studies the behaviour of consumers and the factors that determine the quantity of a product demanded. It helps managers estimate how demand will respond to changes in price, income, tastes, substitutes, complements and advertising.
Law of demand (statement): Other things remaining constant (ceteris paribus), quantity demanded varies inversely with price—when price falls demand rises, and when price rises demand falls.
Assumptions (ceteris paribus conditions):
Exceptions (any three with examples):
Managerial importance:
Thus, demand analysis and the law of demand provide a base for rational business decisions.