Aims and objectives of law of demand
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Economics Discussion
Demand Analysis: Objectives, Law and Function
In this article we will discuss about Demand Analysis:- 1. Objectives ofDemand Analysis 2. Importance ofDemand Analysis 3. Laws 4. Functions.
Objectives of Demand Analysis:
According to Dean, demand analysis has four managerial purposes:
(1) Forecasting sales,
(2) Manipulating demand,
(3) Appraising salesmen’s performance for setting their sales quotas, and
ADVERTISEMENTS:
(4) Watching the trend of the company’s competitive position.
Of these the first two are most important and the last two are ancillary to the main economic problem of planning for profit.
i. Forecasting Demand:
Forecasting refers to predicting the future level of sales on the basis of current and past trends. This is perhaps the most important use of demand studies. True, sales forecast is the foundation for planning all phases of the company’s operations. Therefore, purchasing and capital budget (expenditure) programmes are all based on the sales forecast.
ii. Manipulating Demand:
Sales forecasting is most passive. Very few companies take full advantage of it as a technique for formulating business plans and policies. However, “management must recognize the degree to which sales are a result only of the external economic environment but also of the action of the company itself.
Sales volumes do differ, “depending upon how much money is spent on advertising, what price policy is adopted, what product improvements are made, how accurately salesmen and sales efforts are matched with potential sales in the various territories, and so forth”.
Often advertising is intended to change consumer tastes in a manner favourable to the advertiser’s product. The efforts of so-called ‘hidden persuaders’ are directed to manipulate people’s ‘true’ wants. Thus sales forecasts should be used for estimating the consequences of other plans for adjusting prices, promotion and/or products.
Demand Analysis: Objectives, Law and Function
In this article we will discuss about Demand Analysis:- 1. Objectives ofDemand Analysis 2. Importance ofDemand Analysis 3. Laws 4. Functions.
Objectives of Demand Analysis:
According to Dean, demand analysis has four managerial purposes:
(1) Forecasting sales,
(2) Manipulating demand,
(3) Appraising salesmen’s performance for setting their sales quotas, and
ADVERTISEMENTS:
(4) Watching the trend of the company’s competitive position.
Of these the first two are most important and the last two are ancillary to the main economic problem of planning for profit.
i. Forecasting Demand:
Forecasting refers to predicting the future level of sales on the basis of current and past trends. This is perhaps the most important use of demand studies. True, sales forecast is the foundation for planning all phases of the company’s operations. Therefore, purchasing and capital budget (expenditure) programmes are all based on the sales forecast.
ii. Manipulating Demand:
Sales forecasting is most passive. Very few companies take full advantage of it as a technique for formulating business plans and policies. However, “management must recognize the degree to which sales are a result only of the external economic environment but also of the action of the company itself.
Sales volumes do differ, “depending upon how much money is spent on advertising, what price policy is adopted, what product improvements are made, how accurately salesmen and sales efforts are matched with potential sales in the various territories, and so forth”.
Often advertising is intended to change consumer tastes in a manner favourable to the advertiser’s product. The efforts of so-called ‘hidden persuaders’ are directed to manipulate people’s ‘true’ wants. Thus sales forecasts should be used for estimating the consequences of other plans for adjusting prices, promotion and/or products.
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The law of demand affirms that with all determinants persisting consistent, the greater the value of a product results in the lower the demand.
In markets, this law is essential when it comes to the pricing of commodities. Companies and retailers know that the more expensive of the value their commodities, the lower the numbers that they will market.
It also encourages the administration to set charges on products. Supplementary could tax on primary goods could lead to their expansion in cost hence most individual will not yield them. On the other hand, expenses will enhance the cost of doing business diminishing investments into the economy.
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