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Milestone Two Tips to Get Started with Writing About Demand

One of the critical elements covered in the material this week is to evaluate the trends in demand over time and explain their impact on the industry and on the firm. But how do you evaluate the trends in demand over time and explain their impact on the industry and the firm? Here are some ideas of concepts that could be applied to your firm to help you evaluate the trends in demand. You don’t need to discuss everything I cover in this post; this is just to provide some ideas to help you get started on your research!

Market demand is the demand by all the consumers of a given good or service. Find out who your customers are and provide detail on them. Use annual sales data to find out how much of the product is purchased. You should have received the Supply and Demand Help Excel Spreadsheet via email that will help you walk through the process of gathering and analyzing data.

The main question to ask yourself as you analyze the data is: how has the annual sales data changed over time? There are several variables that can shift market demand: income, prices of related goods, tastes, population and demographics, expected future prices. Discuss those in variables in detail that relate to demand changes for your firm. Here is some further detail on each of these factors that can help you as you write your paper.

Income

The available income of a consumer impacts their willingness and ability to buy your product(s). Discuss whether your product is a normal good or an inferior good. A product is a normal good if demand increases and income rises and decreases as income falls. A product is an inferior good if the demand increases as income falls and decreases as income rises. In your paper you could discuss any changes in disposable income for your customers as a whole and how that impacts demand. Explain if the demand has increased/decreased and how that impacts the equilibrium price and quantity.

Prices of related goods

The prices of other goods can be a big factor impacting the demand for a product. Substitutes are goods and services that can be used for the same purpose as your product. If your firm was impacted by the price change of a good that many consider to be a substitute for your product, you can discuss the impact in this section. If the price of a substitute good falls, then the demand for your product would fall (demand curve shifts to the left). If the price of a substitute good increases, then the demand for your product would increase (demand curve shifts to the right). Explain how the shift in demand impacts equilibrium price and quantity. You could also discuss any goods that are complements to your product in this section. Complements are goods and services that are used together. If the price of a complement good falls, then the demand for your product would increase (demand curve shifts to the right). If the price of a complement good increases, then the demand for your product would decrease (demand curve shifts to the left) because it is more expensive to buy a good that is used together with your product.

Tastes

What could impact consumer tastes (preferences) for your product? One idea might be advertising, which could help increase the demand. Negative advertising by competing firms, or perhaps by reviewers of the product, could decrease the demand. Other trends, such as environmental consciousness, could impact your product as people move to change their purchasing behavior.

Population and Demographics

Population can impact demand because as the population increases, the number of consumers also increases which should lead to an increase in demand of most goods. Changes in demographics (characteristics of a population such as age, race, and gender) could also impact the demand of your product because different groups of people have different preferences for the goods they purchase.

Expected Future Prices

Consumers of your product might delay making a purchase for a while if they expect that prices of your product will fall. That would decrease the demand for your product right now. Alternatively, if consumers are expecting the price of your product to rise, the demand for your product will increase as consumers try to purchase before the expected price hike.

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