1.2.1-Demand Flashcards
(9 cards)
What is demand?
Demand for a good or service is the quantity that customers are willing and able to buy at a given price in a given period of time
What is the basic law of demand?
Demand varies inversely with price,lower prices make products more affordable so demand increases
Changes in customer income as a factor leading to change in demand
as income rises the demand should rise however for inferior goods demand may fall as consumers choose better alternatives that are now more affordable. The extent of the change depends on the income elasticity of demand.
Fashion, tastes and preferences as a factor leading to change in demand
demand products that are fashionable or trendy will experience sharp fluctuations in the quantity demanded. Business may invest heavily into development to upgrade products in fashion to generate higher demand
advertisement and branding as a factor leading to a change in demand
A key purpose of advertising and branding is to stimulate demand for example advertising can lead to an increase in awareness of a product or service which can lead to an increase in quantity demanded.
Businesses with a positive brand image may experience increase in demand .Branding can also develop the business a strong brand name which can increase brand awareness, word of mouth advertisement and brand loyalty. Brand loyalty=increase prices
seasonality as a factor leading to change in demand
most products there will be seasonal peaks and troughs in sales for example demand for ice creams is linked to summer months.The weather and holiday periods can also cause fluctuations in demand
External shocks as a factor factor leading to change in demand
A sudden and significant change in the external environment such as terrorism and major health scares can impact demand for certain products. eg. covid has strict rules such as being unable to trade face to face
changes in the prices of substitutes and complementary goods as a factor leading into change in demand
substitute gods are goods that could be used for the same purpose and are therefore in competitive demand examples include tea and coffee and cereal brands.Increase in the price of tea for example will lead to a decrease in quantity demanded for tea which may cause some consumers to switch to coffee.
complementary goods are goods which are bought and used together for example bacon and eggs. A decrease in the price of bacon will lead to an increase in quantity demanded for bacon which then could lead to higher demand for eggs
Demographics as a factor leading to change in demand
Demographics is the size and composition of a population eg. age,gender
The more customers that match demographic of target market the higher the demand
eg.ageing population increses demand in support for older people such as healthcare
