List out the determinants of demand. Define demand forecasting. Mention the types of demand determinants
Determinants of demand are factors that affect the quantity of a good or service that consumers are willing and able to buy at a given price. These determinants include:
1. Price of the good or service
2. Income of consumers
3. Price of related goods (substitutes and complements)
4. Consumer preferences and tastes
5. Population size and demographics
6. Consumer expectations about future prices and income
7. Advertising and other promotional activities
8. Government policies and regulations
Demand forecasting is the process of estimating future demand for a product or service based on historical data, market trends, and other factors. It is a crucial aspect of business planning and decision making, as it helps businesses anticipate and prepare for changes in consumer demand.
Types of demand determinants include:
1. Price determinants: Changes in the price of a good or service can have a significant impact on demand. A decrease in price often leads to an increase in demand, while an increase in price can lead to a decrease in demand.
2. Income determinants: Changes in consumer income can also affect demand. An increase in income may lead to an increase in demand for normal goods, while a decrease in income may lead to a decrease in demand for luxury goods.
3. Cross-price determinants: Changes in the price of related goods, such as substitutes or complements, can affect demand. For example, an increase in the price of one brand of soda may lead consumers to switch to a cheaper brand, increasing demand for that brand.
4. Consumer preferences and tastes: Changes in consumer preferences and tastes can also impact demand for a product or service. For example, a shift in consumer preferences towards healthier foods may lead to a decrease in demand for fast food.
5. Population size and demographics: Changes in population size and demographics, such as age, income, and location, can also affect demand. For example, an increase in the number of elderly consumers may lead to an increase in demand for healthcare products and services.