When businesses are considering the price of their products and
services, they will sometimes go and look at Supply and Demand.
Supply looks at the price setting point, from the view of the business.
Demand looks at the same process, but from the
Demand and Supply
Definition – Demand means the various quantities of goods
that would be purchased per time period at different prices
in a given market.
Demand curve is the graph depicting the relationship
between the price of a certain Commodity and the amount of
it that consumers are willing and able to purchase at that given
The demand Curve is usually downward sloping, since
consumers will want to buy more as price decreases.
1 Negative Demand
The market is in a state of negative demand if; a major part of
the market dislikes the product and may even pay a price to
2 . No Demands
Target consumers may be uninterested in the
3 Latent Demand:
Many consumers may share a strong need that cannot
be satisfied by any existing products.
4 Irregular Demand
Organizations face demand that varies on a seasonal, daily or
even hourly basis, causing problems of idle capacity or
5 Full Demand
Organizations face full demand when they are
pleased with there volume of business.
6 Overfull Demands
Some organizations face a demand level
that is higher then they can or want to handle.
7 Unwholesome Demand
Unwholesome products will attract organized
effort to discourage their consumption
Demand to the level of optimum capacity
Demand exceeds optimum capacity
Demand below the optimum capacity
Strategies for Demand Management
Strategies for shifting demand to match service capacity.
Communicating busy days and timings.
Providing incentives during non -peak periods.
Identifying regular customers and serving them first.
Scheduling services segment wise
Strategies for Demand Management
Strategies to increase the demand
Entry into new segments
Offering price incentives
Change in service timings
Promote word-of mouth communication
Providing service conveniences to the customer
Demand Too High flex capacity Demand Too
• Stretch time, labor, facilities
• Cross-train employees.
• Hire part-time employees.
• Request overtime work from
• Rent or share facilities.
• Rent or share equipment.
• Subcontract or outsource
• Schedule vacations.
• Schedule employee
• Lay off employees
unoccupied time feels longer
preprocess waits feel longer
anxiety makes waits seem longer
uncertain waits seem longer than finite waits
unexplained waits seem longer
unfair waits feel longer
Longer waits are more acceptable
solo waits feel longer
Management of Demand in Waiting
Employ operational logic to reduce wait
Establish a reservation process
Differentiate waiting customers
Make waiting fun, or at least tolerable
Definition – Supply is the amount of goods that producers are
willing to supply or sell at a given price.
Managing supply means managing capacity.
Capacity is the extent of the ability of a system to deliver the
service it was designed to deliver.
Capacity is defined as the maximum rate of output.
Constraints on capacity
Nature of the constraint Type of service
Labor Law firm
Equipment Delivery services
Tailoring the level of Capacity
“simple” restaurant menu
during peak times, less
leg space and extra seats
in an airplane, etc.
hire part-time people and rent
more equipment at peak times; or
scheduling employee vacations,
sending people to training
programs, renting out equipment.
Two measures of capacity utilization:
percentage of the total time that facilities and
equipment are in revenue operation;
percentage of the physical space (seats, cubic
freight capacity) utilized during operations.
Increasing customer participation
Extending Service Hours
Better SchedulingTools and Practises
Expanding / Renovating Facilities
Equilibrium is when the Demand and Supply are equal.
0 10 20 30 40 50 60 70 80 90
Equilibrium is when both Supply and Demand curves intersect.The equilibrium is in
the middle, which is the amount that the sellers and/or buyers are happy to pay/sell for
the selected products.
Therefore, in this case
the amount demanded
at the price of approx.
$2.20, would be
because this is the
When supply and demand are equal (i.e. when the supply function and
demand function intersect) the economy is said to be at equilibrium.At
this point, the allocation of goods or services is at its most efficient because the
amount of goods or services being supplied is exactly the same as the amount of
goods or services being demanded.Thus, everyone (individuals, firms, or
countries) is satisfied with the current economic condition.At the given price,
suppliers are selling all the goods or services that they have produced and
consumers are getting all the goods or services that they are demanding.