Demand Analysis

In economics, demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. Demand refers to how much (quantity) of a product or service is desired by buyers. The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship. The term demand signifies the ability or the willingness to buy a particular commodity at a given point of time. The concept of demand refers to the total demand for goods to the total demand for goods and services in any economy during a year. Demand essentially consists of consumption demand by the households, investment demand i.e. demand for capital goods by the business firms, Government and net difference between export and imports .In fact aggregate demand is related to the total expenditure flow in an economy in a given period. The flow of money expenditure, investment expenditure, Government expenditure and foreign expenditure i.e. net income from abroad. Demand means effective desire or want for a commodity which is backed by the ability and willingness to buy it i.e. one should have the desire and capacity to buy a commodity and should be willing to pay its price to constitute effective demand for the commodity.

Demand = Desire + Ability to pay +Will to spend. Economists record demand on a demand schedule and plot it on a graph as a demand curve that is usually downward sloping. The downward slope reflects the relationship between price and quantity demanded: as price decreases, quantity demanded increases. In principle, each consumer has a demand curve for any product that he or she would consider buying, and the consumer's demand curve is equal to the marginal utility (benefit) curve. When the demand curves of all consumers are added up, the result is the market demand curve for that product. If there are no externalities, the market demand curve is also equal to the social utility (benefit) curve.

Business Forecasting Business forecasting is a process used to estimate or predict future patterns using business data. Some examples of business forecasting include estimating quarterly sales, product demand, customer lifetime value and churn potential, inventory and supply-chain reorder timing, workforce attrition, website traffic, and predicting exposure to fraud and risk. Several powerful estimation functions are commonly used to perform business forecasting: time series analysis, causal models, and regression analysis. Business forecasting supports executives, analysts and end users in decision-making using decision support systems such as business intelligence. Definition: Forecasting involves making the best possible judgment about some future event. In other words, forecasts are numerical estimates of an event for some future date that can be achieved with a specified level of support and are reproducible. "If we could first know where we are, then whither we are tending, we could then decide what to do and how to do it." Abraham Lincoln, 1809-1865 The elements that come into play in all forecasting methods is the concept of the future and time; uncertainty; and reliance on historical data. Categories of forecasting methods:

Qualitative vs. quantitative methods:Qualitative forecasting techniques are subjective, based on the opinion and judgment of consumers, experts; appropriate when past data is not available. It is usually applied to intermediate-long range decisions. Examples of qualitative forecasting methods are: [citation needed] informed opinion and judgment, the Delphi method, market research, historical lifecycle analogy. Quantitative forecasting models are used to estimate future demands as a function of past data; appropriate when past data are available. The method is usually applied to shortintermediate range decisions. Examples of quantitative: exponential smoothing, multiplicative seasonal indexes. Naive approach:Naive forecasts are the most cost-effective and efficient objective forecasting model, and provide a benchmark against which more sophisticated models can be compared. For stable time series data, this approach says that the forecast for any period equals the previous period's actual value. Reference class forecasting:Reference class forecasting was developed by Oxford professor Bent Flyvbjerg to eliminate or reduce bias in forecasting by focusing on distributional information about past, similar outcomes to that being forecasted. Daniel Kahneman, Nobel Prize winner in economics, calls Flyvbjerg's counsel to use reference class forecasting to de-bias forecasts, "the single most important piece of advice regarding how to increase accuracy in forecasting.

Market Structures In economics, market structure is the number of firms producing identical products which are homogeneous. The types of market structures include the following: Monopolistic competition, also called competitive market, where there is a large number of firms, each having a small proportion of the market share and slightly differentiated products. Oligopoly, in which a market is dominated by a small number of firms that together control the majority of the market share. Duopoly, a special case of an oligopoly with two firms. Monopsony, when there is only one buyer in a market. Oligopsony, a market where many sellers can be present but meet only a few buyers. Monopoly, where there is only one provider of a product or service. Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm. A firm is a natural monopoly if it is able to serve the entire market demand at a lower cost than any combination of two or more smaller, more specialized firms. Perfect competition, a theoretical market structure that

features no barriers to entry, an unlimited number of producers and consumers, and a perfectly elastic demand curve. The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions. The elements of Market Structure include the number and size distribution of firms, entry conditions, and the extent of differentiation. These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade. Competition is useful because it reveals actual customer demand and induces the seller (operator) to provide service quality levels and price levels that buyers (customers) want, typically subject to the sellers financial need to cover its costs. In other words, competition can align the sellers interests with the buyers interests and can cause the seller to reveal his true costs and other private information. In the absence of perfect competition, three basic approaches can be adopted to deal with problems related to the control of market power and an asymmetry between the government and the operator with respect to objectives and information: (a) subjecting the operator to competitive pressures, (b) gathering information on the operator and the market, and (c) applying incentive regulation.

Factors Influencing Demand Price of the product: - Price is always a basic consideration in determinants, the demand for a commodity in large quantity is demanded a low price than a higher price. At a low market price demand for the product will be high; and vice-versa i.e. at a high market price for a product the demand will fall. Distribution of Income & Wealth: - Income is an equal important determinant of demand with the increase in income one can buy more goods. A rich customer can demand more commodities than a poor customer. There is equal distribution of income and wealth, the demand for many products tends to be greater than in the case of unequal distribution. Taste, Habits, Scale of preferences: - Demand for many goods depends on the consumer taste, habits, preferences. Demand for several product like ice cream, chocolates, bhel puri etc. depends on individuals taste. Demand for tea, tobacco, cigarettes etc. are a matter of habit. The demand for a product is greatly affected by the scale of preferences by the customers. Price of related goods: - The demand for a commodity is also its substitution. If the substitutes are relatively more costly, there will be more demand for the commodity at a given price than for its substitute. Complimentary goods are

always in point demand. Its demand will be relatively high where its related commodities price is lower than other wise, when a price of one commodity decreases, the demand for its complimentary goods will increase and viceversa. Standard of living & spending habits of people :- When people adopt a high standard of living and are ready to spend more, demand for many goods with comfort and luxury item will tend to be high than others. Number of buyers and the population. The demand is defined on the number of buyers in the market, a large number of buyers will constitute a large demand. Future expectation: - The buyer expects that the price of the commodity will rise in future. Then present market demand could be more as most of them would like a fall in the future estimation. Fashions: - Demand for many products is affected by change of fashion in the market. For e.g. Demand for commodities like Jeans, salwar kameez, etc. are based on current fashion. Weather condition: - Demand for certain products are determined by weather conditions. For e.g. In summer there is a greater demand for cold drinks, fans, coolers, etc. Advertisements: - In modern time the preference of a consumer can be altered by advertisement demand for many products like toothpaste, washing powders etc. can be altered by

advertisement of product. Product demand is also influenced by seller promotion efforts i.e. also a part of advertisement. Thus the above factors affect the demand of a particular goods/products or services in the market.

Law of Demand In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher(ceteris paribus). The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. Mathematical expression: The negative relation (i.e., higher price attracts lower demand & lower prices encourages high quantity to be bought by the consumers) is based on logic and experience. Mathematically, the inverse relation may be stated with causal relation as: Where, is the quantity demanded of x goods is the function of independent variables contained within the parenthesis, and is the price of x goods. Hence, in the above model, the function () is a varying one i.e., the law of demand postulates as the causal factor (independent variable) and is the dependent variable. Two variables move in the opposite direction. When falls rises and the reverse. In regard to the question "by how much will quantity demanded rise?", the law is silent. For e.g. when for a rail ticket falls from $111 to $105, ridership may rise from 1625 daily riders to 1825 daily riders or even to

just 1626 daily riders. Thus the law of demand merely states the direction in which quantity demanded changes for a given change in price. Moreover, what the law states is hypothetical and not actual. Assumptions Every law will have limitations or exceptions. While expressing the law of demand, the assumption is that other conditions of demand are unchanged. If they don't remain constant, the inverse relation may not hold well. In other words, it is assumed that the income and tastes of consumers and the prices of other commodities are constant. This law operates when the commoditys price changes and all other prices and conditions do not change. The main assumptions are: Habits, tastes and fashions remain constant. Money, income of the consumer does not change. Prices of other goods remain constant. The commodity in question has no substitute or is not in competition by other goods. The commodity is a normal good and has no prestige or status value. People do not expect changes in the price. Price is independent and demand is dependent. Exceptions to the law of demand Generally, the amount demanded of good increases with a decrease in price of the good and vice versa. In some cases, however, this may not be true. Such situations are explained below. Giffen goods

Initially discovered by Robert Giffen, economists disagree on the existence of Giffen goods in the market. A Giffen good describes an inferior good that as the price increases demand for the product increases. As an example, during the Irish Potato Famine of the 19th century, potatoes were considered a Giffen good. Potatoes were the largest staple in the Irish diet, so as the price rose it had a large impact on income. People responded by cutting out on luxury goods such as meat and vegetables, and instead bought more potatoes. Therefore, as the price of potatoes increased, so did the demand. Commodities which are used as status symbols Some expensive commodities like diamonds, air conditioned expensive cars, etc., are used as status symbols to display ones wealth. The more expensive these commodities become, the higher their value as a status symbol and hence, the greater the demand for them. The amount demanded of these commodities increase with an increase in their price and decrease with a decrease in their price. Also known as a Veblen good. Expectation of change in the price of commodity If a household expects the price of a commodity to increase, it may start purchasing a greater amount of the commodity even at the presently increased price. Similarly, if the household expects the price of the commodity to decrease, it may postpone its purchases. Thus, law of demand is violated in such cases. In this case, the demand curve does not slope down from left to right; instead it presents a backward slope from the top right to down left. This curve is known as an exceptional demand curve. Technically, this is not a violation of the law of demand, as it violates the ceteris paribus condition.

Law of demand and changes in demand The law of demand states that, other things remaining same, the quantity demanded of a good increases when its price falls and vice-versa. Note that demand for goods changes as a consequence of changes in income, tastes etc. Hence, demand may expand or contract and increase or decrease. In this context, let us make a distinction between two different types of changes that affect quantity demanded, viz., expansion and contraction; and increase and decrease. While stating the law of demand i.e., while treating price as the causative factor, the relevant terms are Expansion and Contraction in demand. When demand is changing due to a price change alone, we should not say increase or decrease but expansion or contraction. If one of the non-price determinants of demand, such as the prices of other goods, income, etc. change & thereby demand changes, the relevant terms are increase and decrease in demand. The expansion and contraction in demand are shown in the diagram. You may observe that expansion and contraction are shown on a single DD curve. The changes (movements) take place along the given curve k. Limitation Change in taste or fashion. Change in income Change in other prices. Discovery of substitution. Anticipatory change in prices. Rare or distinction goods. There are certain goods which do not follow this law. These include Veblen goods and Giffen goods.

Diagram Demand schedule A demand schedule, depicted graphically as the demand curve, represents the amount of some good that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods, and the price of complementary goods, remain the same. Following the law of demand, the demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good. Just as the supply curves reflect marginal cost curves, demand curves are determined by marginal utility curves.Consumers will be willing to buy a given quantity of a good, at a given price, if the marginal utility of additional consumption is equal to the opportunity cost determined by the price, that is, the marginal utility of alternative consumption choices. The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time. As described above, the demand curve is generally downwardsloping; there may be rare examples of goods that have upwardsloping demand curves. Two different hypothetical types of goods with upward-sloping demand curves are Giffen goods (an inferior but staple good) and Veblen goods (goods made more fashionable by a higher price). By its very nature, conceptualizing a demand curve requires that the purchaser be a perfect competitorthat is, that the purchaser has no influence over the market price. This is 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. As with supply curves, economists distinguish between the demand curve of an individual and the market demand curve. The market demand curve is obtained by summing the quantities demanded by all consumers at each potential price. Thus in the graph of the demand curve, individuals' demand curves are added horizontally to obtain the market demand curve. The determinants of demand follow: Income Tastes and preferences Prices of related goods and services Consumers' expectations about future prices and incomes that can be checked Number of potential consumers

Elasticities & Damand Levels Definition of 'Demand Elasticity' In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. Demand elasticity is important because it helps firms model the potential change in demand due to changes in price of the good, the effect of changes in prices of other goods and many other important market factors. A firm grasp of demand elasticity helps to guide firms toward more optimal competitive behavior. Elasticities greater than one are called "elastic," elasticities less than one are "inelastic," and elasticities equal to one are "unit elastic." Price Elasticity of Demand Formulae In this case, the two key words are 'price' and 'demand', so the price elasticity of demand measures the responsiveness of the quantity demanded to a given price change. In most cases, the demand for a good rises when the price falls, ceteris paribus. The question is, by how much? The following formula can be used to measure exactly how responsive demand is to a given price change: Ed=%Qd =the percentage change in quantity demanded. % P the percentage change in price. So the algebraic terms mean: Ed = The price elasticity of demand = 'change in' Qd = Quantity demanded P = Price

Calculating the elasticity Let's start with the easiest questions you might face: For eg:The price of a CrispyChoc Bar in the local newsagent rises from 25p to 30p. As a result, the newsagent finds that the demand for this product falls from 80 bars a day to 40 bars a day. Find the price elasticity of demand. At this point, it might be worth reviewing how to calculate percentage changes. Basically, you work out the change, divide this change by the original figure and then multiply the result by 100. Or, if you prefer the algebraic form: So, the percentage change in quantity demanded is -40 (the change, or fall in demand) divided by 80 (the original amount demanded) multiplied by 100. -40 divided by 80 is -0.5. Multiply this by 100 and you get -50%. The percentage change in price is +5 (the change in price) divided by 25 (the original price) multiplied by 100. 5 divided by 25 is 0.2. Multiply by 100 and you get 20%. Now we can use the formula for the price elasticity of demand: Notice that the answer is negative. This is because the price rose (positive) causing the quantity demanded to fall (negative). A negative divided by a positive is always negative. This is to be expected. The demand curve is nearly always downward sloping showing a negative relationship between price and quantity demanded. Because nearly all elasticities of demand are negative examiners often don't use the negative sign. The

question will just state an elasticity of, say, 3. What they mean is -3, so don't get too confused! Calculating demand and price changes from a given elasticity Often, you will face the following type of question: A greengrocer decides to cut the price of his bananas from 40p per lb to 32p per lb. The price elasticity of demand for this product is 2. He currently sells 80lbs of bananas a day. How many will he sell after the price cut? The maths doesn't really get any harder than this in A level economics. That's meant to be a good thing, by the way! The formula has three parts: Ed, %Qd and %P. In the questions where you had to find the value of the elasticity, you were given two of the three parts and asked to find the third. In the question above, exactly the same thing has happened except the part you need to find has changed. Ed=%Qd % P Remember that although the elasticity is stated as '2', it is, in fact, -2: -2=%Qd -20 Now we can rearrange the formula (remember that GCSE maths!): (Minus times a minus is a plus). So the demand for the greengrocer's bananas will rise by 40%. Initial sales were 80lbs a day, so sales after the price cut will be 112lbs a day (40% of 80 is 32. Add this to 80 to give 112.)

Demand Analysis for various products & situations For eg.1:Let us take the example of holidays & vacations - tours and travels industry. Due to recession, not many people are so interested in going for luxury vacations or exotic holidays. Many people are unsure of their jobs and hence want to cut down on their spending and also many people have lost their jobs due to the crisis and are currently not in a position to spend on such luxuries. As a result the tourism industry and the hospitality industry are badly hit. For eg.2:Demand Analysis for Cadbury Dairy Milk Chocolate

Independent Variables affecting demand of Cadbury Dairy Milk

Price:- This product is a brand loyal product, so if there is a slight increase in the price, the demand of the product will remain unaffected. But if there is a decrease in the price, the demand of the product may slightly increase.

Income:- If the income of the people increases, the demand of the product also increases and if the income of the people decreases, the demand of the product decreases because then people will go for lower price chocolate like clair or melody of Rs.1 or Rs. 2. So, there is a positive relationship between income and the product demand.

Population & Age group: - This product is meant for the children, adults and also for the old people so the age groups are not much affected the demand of the product so demand remain same and by the increase in the population, the demand of the product also increases.

Brand Image: - The brand image of the Cadbury plays an important role in the demand of the Cadbury. This product has built such a brand image that it has much attracted the mind of the consumers so they will not like to switch over to the other brand.

Consumers taste and preferences: - Cadbury produced milk chocolates by using the high quality of cocoa bean and the taste has still remained the same which has touched the heart of the consumers. So, they will not like to go for any other product.

Competition:- There are many competitors like Cadbury 5-star, Nestle Kit-Kat, parle chox, foreign chocolates (Chinese Chocolates), lotee etc. in the market so if the price of the competitors increases, the demand of the dairy milk also increases. But if the price of the competitors decrease, the demand of the dairy milks not much affected by it.

Price of Complementary Goods: - Cadbury dairy milk is made from the milk, sugar, cocoa bean and cocoa powder. If the price of these complementary goods increases then there will be no change in the demand. Because Cadbury dairy milk is a brand loyal product so there will not be any effect on the demand of the product.

Advertisement campaign: - Advertisement campaign has played a vital role in attracting the major part of the population towards the Cadbury dairy milk. It was through this campaign like Real Test of Life & Kuch Meetha Ho Jaye That Cadbury shifted its focus from kids to the all age people and later through Khanewalon Ko Khane Ka Bahana Chahiye &

Pappu Pass Ho Gaya, Cadbury has associated dairy milk to celebrations and every moment of achievement and success. So, it is through advertisement that Cadbury has gained social acceptance which has played a major role in increasing his demand.

Celebrations & Occasions: - During the festivals and occasions, the consumption of Cadbury increases because its a product for enjoying the taste of each and every moment with harmony.

PRICE ELASTICITY Our product is a brand loyal product so if we increase our price by 20% then demand of our product will decrease by 5% that means elasticity of price is <1. So, our product is less elastic. (If we increase the price by Rs. 1 then demand will fall by 5 pc per 100 pc) Ep = Qd . P Px =5. 5 1 100 =0.25 Q

[Our Products price elasticity is <1 because our product is in monopolistic market] Arc price elasticity: Ep = Q2-Q1 . P2+P1 P2-P1 Q2+Q1

= 95-100 . 6 + 5 6-5 = -0.28 95+00

INCOME ELASTICITY If the income rises by 20% then the demand will rise by 10% the curve is positivelysloped means that elasticity of Income is >0 and <1. (When the average income was Rs. 10,000 and demand was 100) Ei = Qd . I Ix = Q

10 . 10000 2000 100

= 0.50.

Arc income elasticity: Ei = Q2-Q1 . I2+I1 I2-I1 Q2+Q1 = 110-100 . 12000+10000 12000-10000 = 0.52 110+100

CROSS ELASTICITY OF DEMAND If there is an increase in the price of Kit-Kat or Munch by 20% to 25% then thedemand for the dairy milk will increase by 8%. (When there is an increase of Rs.1 in the substitutes price then the demand of thedairy milk will increase by 8%) EXY = QX . PY PY QX =8. 5 1 100 = 0.4

Arc cross- price elasticity: EXY = Qx2-Qx1 . Py2+Py1 Py2+Py1 Qx2+Qx1 = 108-100 . 6 + 5 6-5 = 0.42 108+100

Cross Elasticity for Complementary Goods: If the price of the cocoa bean, milk and other complementary goods like plastic packaging materials will increase constantly than the cost of the production willincrease and by this the price of the relevant product will also increase but thedemand of the dairy milk will remain constant because of it is a normal good.

Short run and long run impact in the elasticity of the demand: In the Short run period of time, the demand for the dairy milk is less elastic because if the price of the dairy milk chocolate suddenly increases Rs.5 to Rs.7, than the demand of the product will also decrease but in the long run the demand may not be much affected. There are some criteria that also affects and they are like:

Our product should be in the monopolistic competitive market product. No change in the taste and quality.

In the Long run period of time, the demand for the dairy milk is more elastic because if the price of the dairy milk in the 2005 was Rs.5 and in the 2010 it will beRs.10 and, the quantity and the quality will remain the same and the other products also like Kit-Kat and Munch, if they dont change any of the things like price, quality and quantity than it will greatly affect the demand of the dairy milk and it will started decreasing day by day.

Assumptions: There are possibilities of change in technology & chances of Product innovation in the long run.

There are possibilities of increasing good quality chocolate manufacturing units.

Band Wagon Effect: The band wagon effect is totally depended on the mentality of the human beings. The advertisement campaign with Amitabh

Bachchan has made an increase in the demand of the dairy milk. It indicates that if the one person is going to buy dairy milk chocolate than the other also want to buy the same chocolate.

Snob Effect: This is a kind of totally contra effect of the band wagon effect. If a person bought one particular product then the other person wants superior product than the person had already bought. But in our product the demand does not affect by the snob effect

Goods Long Run & Short Run Demand

"The short run is a period of time in which the quantity of at least one input is fixed and the quantities of the other inputs can be varied. The long run is a period of time in which the quantities of all inputs can be varied. There is no fixed time that can be marked on the calendar to separate the short run from the long run. The short run and long run distinction varies from one industry to another."

I find examples helpful, so we'll consider a hockey stick manufacturer. A company in that industry will need the following to manufacture sticks: Raw materials such as lumber Labor Machinery A factory

Suppose the demand for hockey sticks has greatly increased, prompting our company to produce more sticks. We should be able to order more raw materials with little delay, so we consider

raw materials to be a variable input. We'll need extra labor, but we can likely increase our labor supply by running an extra shift and getting existing workers to work overtime, so this is also a variable input. The equipment on the other hand, may not be a variable input. It may be time consuming to implement the use of additional equipment. It depends how long it would take us to buy and install the equipment and how long it would take us to train the workers to use it. Adding an extra factory is certainly not something we could do in a short period of time, so this would be the fixed input. Using the definitions given at the beginning of the article, we see that the short run is the period in which we can increase production by adding more raw materials and more labor. In the short run we cannot add another factory, but in the long run all of our inputs are variable, including our factory space. The increase in demand for hockey sticks will have different implications in the short run and the long run at the industry level. In the short run each of the firms will increase their labor supply and raw materials to meet the added demand for hockey sticks. At first only existing firms will be likely to capitalize on the increased demand as they will be the only ones who will have access to the four inputs needed to make the sticks. However we know that in the long run the factor input is variable as well. This means that existing firms can change the size and number of factories they own and new firms can build or buy factories to produce hockey sticks. In the long run we

will see new firms enter the hockey stick market, while we will not in the short run because firms will not be able to acquire all of the inputs they need.

Short Run vs. Long Run In Summary Short Run: Some inputs variable, some fixed. New firms do not enter the industry, and existing firms do not exit. Long Run: All inputs variable, firms can enter and exit the market place.

Durable & Non-Durable Goods Demand

In economics, a durable good or a hard good is a good that does not quickly wear out or more specifically, one that yields utility over time rather than being completely consumed in one use. Items like bricks could be considered perfectly durable goods, because they should theoretically never wear out. Highly durable goods such as refrigerators, cars, or mobile phones usually continue to be useful for three or more years of use,[1] so durable goods are typically characterized by long periods between successive purchases. Examples of consumer durable goods include cars, household goods (home appliances, consumer electronics, furniture, etc.), sports equipment, and toys.

Nondurable goods or soft goods (consumables) are the opposite of durable goods. They may be defined either as goods that are immediately consumed in one use or ones that have a lifespan of less than 3 years. Examples of nondurable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, rubber,

plastics, textiles, clothing and footwear. While durable goods can usually be rented as well as bought, nondurable goods generally are not rented. While buying durable goods comes under the category of Investment demand of Goods, buying Non-Durables comes under the category of Consumption demand of Goods.

Autonomous Demand & Firm Demand

Autonomous Demand:When a particular commodity is demanded for its own sake it is known as autonomous demand. Demand for house is an example for autonomous demand. When the demand for a product is tied to the purchase of some parent product, its demand is called induced or derived. For e.g., the demand for cement is induced by (derived from) the demand for housing. As stated above, the demand for all producers goods is derived or induced. In addition, even in the realm of consumers goods, we may think of induced demand. Consider the complementary items like tea and sugar, bread and butter etc. The demand for butter (sugar) may be induced by the purchase of bread (tea). Autonomous demand, on the other hand,

is not derived or induced. Unless a product is totally independent of the use of other products, it is difficult to talk about autonomous demand. In the present world of dependence, there is hardly any autonomous demand. Nobody today consumers just a single commodity; everybody consumes a bundle of commodities. Even then, all direct demand may be loosely called autonomous.

Firm & company demand:An industry is the aggregate of firms (companies). Thus the Companys demand is similar to an individual demand, whereas the industrys demand is similar to aggregated total demand. You may examine this distinction from the standpoint of both output and input. For example, you may think of the demand for cement produced by the Cement Corporation of India (i.e., a companys demand), or the demand for cement produced by all cement manufacturing units including the CCI (i.e., an industrys demand). Similarly, there may be demand for engineers by a single firm or demand for engineers by the industry as a whole, which is an example of demand for an input. You can appreciate that the determinants of a companys demand may not always be the same as those of an industry. The inter-firm differences with regard to technology, product quality, financial position, market (demand) share, market leadership and competitiveness- all these are

possible explanatory factors. In fact, a clear understanding of the relation between company and industry demands necessitates an understanding of different market structures.

Conclusions

The estimated Marshallian own-price elasticities indicate a strong price responsiveness of food demand in Paraguay. Household demand responses to price are mainly driven by substitution effects. Roots are complement with rice. But Fruits and Vegetables and Red Meat are substitute for cereals. But cereals are complementary with other meat. Oils and Fat are substitute for Red Meat and Other Meat. The signs of all income and price parameters are consistent with the expectations: positive and less then unity income elasticity, negative own-proce elasticities, small cross-price elasticities