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Demand - Demand curve

In economics the demand curve is the graphical representation of the relationship between the price and the quantity that consumers are willing to purchase. The curve shows how the price of a commodity or service changes as the quantity demanded increases. Every point on the curve is an amount of consumer demand and the corresponding market price. The graph shows the law of demand, which states that people will buy less of something if the price goes up and vice versa.

Demand - Inverse demand function

The inverse demand function is useful in deriving the total and marginal revenue functions. Total revenue equals price, P, times quantity, Q, or TR = P×Q. Multiply the inverse demand function by Q to derive the total revenue function: TR = (120 - .5Q) × Q = 120Q - 0.5Q². The marginal revenue function is the first derivative of the total revenue function; here MR = 120 - Q. Note that the MR function has the same y-intercept as the inverse demand function in this linear example; the x-intercept of the MR function is one-half the value of that of the demand function, and the slope of the MR function is twice that of the inverse demand function. This relationship holds true for all linear demand equations. The importance of being able to quickly calculate MR is that the profit-maximizing condition for firms regardless of market structure is to produce where marginal revenue equals marginal cost (MC). To derive MC the first derivative of the total cost function is taken. For example, assume cost, C, equals 420 + 60Q + Q 2. Then MC = 60 + 2Q. Equating MR to MC and solving for Q gives Q = 20. So 20 is the profit maximizing quantity: to find the profit-maximizing price simply plug the value of Q into the inverse demand equation and solve for P.

Demand - Perfectly inelastic demand

Perfectly inelastic demand is represented by a vertical demand curve. Under perfect price inelasticity of demand, the price has no effect on the quantity demanded. The demand for the good remains the same regardless of how low or high the price. Goods with (nearly) perfectly inelastic demand are typically goods with no substitutes. For instance, insulin is nearly perfectly inelastic. Diabetics need insulin to survive so a change in price would not effect the quantity demanded.

Demand - Factors influencing demand

Nature of the good: If the good is a basic commodity, it will lead to a higher demand

Demand - Factors influencing demand

Good's own price: The basic demand relationship is between potential prices of a good and the quantities that would be purchased at those prices. Generally the relationship is negative meaning that an increase in price will induce a decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a negative relationship is reasonable and intuitive. For example, if the price of a gallon of milk rose from \$5 to a price of \$15, this is a big price increase. This significant price increase causes the consumer to demand less of that product at the price of \$15 because not only is it more expensive, but the new price is very unreasonable for a gallon of milk.

Demand - Residual demand curve

The demand curve facing a particular firm is called the residual demand curve. The residual demand curve is the market demand that is not met by other firms in the industry at a given price. The residual demand curve is the market demand curve D(p), minus the supply of other organizations, So(p): Dr(p) = D(p) - So(p )

Demand - Factors influencing demand

Population: If the population grows this means that demand will also increase.

Demand - Inverse demand function

In its standard form a linear demand equation is Q = a - bP. That is, quantity demanded is a function of price. The inverse demand equation, or price equation, treats price as a function g of quantity demanded: P = f(Q). To compute the inverse demand equation, simply solve for P from the demand equation. For example, if the demand equation is Q = 240 - 2P then the inverse demand equation would be P = 120 - .5Q, the right side of which is the inverse demand function.

Demand - Factors influencing demand

Mathematically, the variable representing the price of the complementary good would have a negative coefficient in the demand function. For example, Q d = a - P - P g where Q is the quantity of automobiles demanded, P is the price of automobiles and P g is the price of gasoline. The other main category of related goods are substitutes. Substitutes are goods that can be used in place of the primary good. The mathematical relationship between the price of the substitute and the demand for the good in question is positive. If the price of the substitute goes down the demand for the good in question goes down.

Demand - Factors influencing demand

Tastes or preferences: The greater the desire to own a good the more likely one is to buy the good. There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good based on its intrinsic qualities. Demand is the willingness and ability to put one's desires into effect. It is assumed that tastes and preferences are relatively constant.

Demand management - Demand controller

A demand controller is established when a company implements a demand control process. Unlike a demand planner who focuses on long-term order management, the demand controller is responsible for short-term order management, focusing specifically when demand exceeds supply or demand appears to be less than planned, and engages sales management in both situations. The demand controller works across multiple functions involved in the supply and demand processes, including demand planning, supply planning, sales, and marketing.

Peak demand - Demand Tariff

Electricity network is built to deal with the highest possible peak demand otherwise blackout may happen. In Australia, demand tariff has three components: peak demand charge, energy charge and daily connection charge. For example, for large customers (commercial,industrial or mixed of commercial/residential), the peak demand charge is based on the highest 30 minutes electricity consumption in a month; the energy charge is based on a month electricity consumption. This type of demand tariff is gradually introduced to residential households and will be rolled out by 2020 in Queensland Australia. How to manage electricity bills under demand tariff can be challenging. The key solutions involve improving building efficiency and managing the operational settings of large power appliances.

Demand management - Demand control

Demand control creates synchronization across the sales, demand planning, and supply planning functions. Unlike typical monthly demand or supply planning reviews, demand control reviews occur at more frequent intervals (daily or weekly), which allows the organization to respond quickly and proactively to possible demand or supply imbalances.

Demand management - Demand control

Demand control is a principle of the overarching demand management process found in most manufacturing businesses. Demand control focuses on alignment of supply and demand when there is a sudden, unexpected shift in the demand plan. The shifts can occur when near-term demand becomes greater than supply, or when actual orders are less than the established demand plan. The result can lead to reactive decisions, which can have a negative impact of workloads, costs, and customer satisfaction.

Demand - Demand management in economics

Demand management in economics is the art or science of controlling economic or aggregate demand to avoid a recession. Such management is inspired by Keynesian macroeconomics, and Keynesian economics is sometimes referred to as demand-side economics.

Demand - Constant price elasticity demand

Constant elasticity of demand occurs when Q=aP^{c} where a and c are parameters, and the constant price elasticity is c\le 0.

Demand - Different types of goods demand

Seasonal demand:Some services do not have an all year round demand, they might be required only at a certain period of time. Seasons all over the world are very diverse. Seasonal demands create many problems to service organizations, such as:- idling the capacity, fixed cost and excess expenditure on marketing and promotions. Strategies used by firms to overcome this hurdle are like - to nurture the service consumption habit of customers so as to make the demand unseasonal, or other than that firms recognize markets elsewhere in the world during the off-season period. Hence, this presents and opportunity to target different markets with the appropriate season in different parts of the world. For example, the need for Christmas cards comes around once a year. Or the, seasonal fruits in a country.

Demand - Different types of goods demand

Demand patterns need to be studied in different segments of the market. Service organizations need to constantly study changing demands related to their service offerings over various time periods. They have to develop a system to chart these demand fluctuations, which helps them in predicting the demand cycles. Demands do fluctuate randomly, therefore, they should be followed on a daily, weekly or a monthly basis.

Aggregate demand - Aggregate demand curves

Understanding of the aggregate demand curve depends on whether it is examined based on changes in demand as income changes, or as price change.

Supply and demand - Demand schedule

By its very nature, conceptualizing a demand curve requires that the purchaser be a perfect competitor—that is, that the purchaser has no influence over the market price. This is true because each point on the demand curve is the answer to the question "If this buyer is faced with this potential price, how much of the product will it purchase?" If a buyer has market power, so its decision of how much to buy influences the market price, then the buyer is not "faced with" any price, and the question is meaningless. Loading...