Demand analysis is important for managers to make production decisions. Demand refers to the quantity of a product consumers will purchase at a given price. There are several types of demand including durable/perishable goods demand, consumer/producer goods demand, autonomous/derived demand, and individual/market demand. Market demand is the sum of individual demands. Factors that influence demand include price, income, tastes, prices of related goods, population size, expectations, government policy, credit availability, advertising, and season/weather. Understanding these demand factors is essential for effective production planning.

1. DEMAND ANALYSIS

2. INTRODUCTION
 Demand Analysis is very important to the managers to take production
related decision. Based on Demand Analysis, the managers have to prepare
a production schedule, budget, purchasing required raw materials and
machineries etc.
MEANING OF DEMAND
The more number of quantities required by “the purchasers at a particular
point of time at a particular cost of the product it is called demand”.
 A product goods or service are flowing conditions are too met:
 The commodity to inspire and create likingness for the persons who see.
 Commodity need to create a thought of purchasing and make the customer
decide to buy the commodity.
 Person who has the capacity to purchase with happiness and contentment.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

3. DEFINITION OF DEMAND
“The various quantities of a given commodity or service which
consumers would buy in one market in a given period of time
at various prices or at various incomes or at various prices of
related goods”- According to Bober.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

4. The demands would be off varies kind. Here demands
recording the products in the market are outlined and few types of
demand are considered.
Durable and Perishable goods demand
Durable goods are classified based on their durability. Durable
goods are functioning very long period. The sales of durable
goods go moderately to satisfy new demand and partly to replace
old items.
Ex: Durable goods – Furniture, TV, refrigerator, washing
machine etc.
The Perishable goods life time is very small may be a day or week
after that we cannot use this types of goods in long periods.
Ex: Milk, Fruits, vegetables etc.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

5. Consumer goods Demand and Producer Goods
Demand
Consumers Goods and services are capable of fulfill
the human needs. These types of goods only direct
and immediate satisfaction. Goods consumed by
human-beings, animals, birds etc.
Ex: Consumer goods – Toothpaste, cloth, seeds,
etc.
 Producer goods are those, which are used to other
products like machines, tools, jig and fixture, raw
materials and factory buildings, etc.
 Ex: Producer goods – Raw materials, machinery
and special tool etc.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

6. Autonomous and Derived Demand
The autonomous demand is direct demand for product or
service.
Ex: Hospital requirements and all type of consumer goods
like car, bike and mobile.
 If derived demand for a product arises out of the purchase of a
parent product. The demand is totally independent of any other
product of demand.
Ex: Derived Demand - all type of industrial goods like
cement, cotton and hotel requirements like rice.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

7. Individual’s Demand and Market Demand
The individual demand means how much quantities are
required to satisfying human needs.
Example: vegetables, Rice, bread etc.
Tomato - Price/kg (Rs). Demand of Tomato (Kg)
50 1
40 1.5
30 2
20 2.5
10 3
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

8. Market demand is the summation of individual demand in the Market. We
can find the market demand in region wise.
Example Below the table we are mentioned price of the product and vary
individual buyer demand and market demand is summation of all
Individual Demand get market demand. If increase number of buyer and
quantity as well as increase the market demand automatically.
Price of a
Product
Individual Demand Market
Demand
B1 B2 B3 B4
18 10 8 12 10 40
15 14 16 10 8 48
10 15 20 10 15 60
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

9. Firm and Industry Demand
 The quantity of demand required to single or small business units is called
firm demand.
Ex: Firms Demand – A manufacturing unit required to make a
product 1000 kg per month.
Demand by Market Segments and by Total Market
 The demand by market segment based on product user, distribution
channel, number of customer, product varies and size.
 Industry also concentrates the price of the product, competition product,
and fixing profit it may to distinguish the market segments.
 Total market demand of product from all market segments demand would
refer to demand for the product in that specific market segment.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

10. The demand varies according to the situation that exists at that particular point of
time. Here we have considered few factors based on assumption in law of demand.
 Product Price
Product Demand is inversely proportional to price of the product. If price of the product
increases means demand is decreases and vice versa.
 Income level of the consumer
As the income level of customer or household increases, there is tendency to buy more
products at a particular time limit. The demand of the product is directly related to the
customer income.
 Tastes and preferences
These depend upon the social customs, habits and general lifestyle. Some of these like
fashion keep on changing as a result their demand keeps on changing.
For ex: the craze of being fit has increased the demand for cycles.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

11. Price of related goods
 The Related goods may be in the form of substitute or complementary
goods.
Substitute goods
 The consumers have a choice of selecting a product or goods which fall
under the same categories for example Tea, milk and coffee. These
come under the same categories hence consumers can switch to any
one of this when his preferred one is not available.
Complementary goods
 These goods are jointly used or consumed together Example: pen and
ink.
 If increase the price of the ink they would cause a decrease in the
demand for pen. Hence price of ink has a negative association with the
quantity demanded of pen.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

12. Size of population and composition
Larger the population larger will be the number of consumers. Also the
composition of population has an effect on the demand.
 Example: A higher number of females will have an increased
demand for cosmetics and sarees. These are the demographic effects
on demand for the commodities.
Expectations about the price in future
If consumers expect a product price will rise in future mean the
demand of the goods also will increase and customer income is directly
related to the demand of goods.
 Ex: petrol price, land and gold etc.
Government policy
 If government imposes taxes on commodities their price will increase
and demand will decrease while in case if granting subsidies the price
will decrease and hence the demand will increase.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram

13. Consumer credit facility
 With the availability of credit sand loans (monthly EMI)
from banks consumers have been able to afford
commodities they would have otherwise not purchased.
The demand for cars has increased due to bank loans.
Advertisement Efforts
 The advertisement not only influence the customers
desire to buy the product but sometimes makes customers
to increase his status by possessing the product. Thus
advertisement creates understanding and popularizing the
product.
Season and weather
 Based on weather and climate condition the demand of
the product will increase. Demand for woolen clothes
goes up in winter whereas their demand is extremely less
in summer.
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Mr.K.Vinothkumar, Ass Prof,
Mechanical, SRMIST, Ramapuram