Theme 1 - Demand Flashcards
What is demand ?
Demand is the amount of a good that consumers are willing and able to buy at a given price
What factor determines levels of demand ?
• Price and demand are related – here is an example
• As the price increases on a product or service, normally, the demand will decrease as less customers are willing (or able) to pay the price
How does price of substitutes determine the level of demand ?
• A substitute product is an alternative
• For example if a customer cannot afford to fly to a destination they may consider going via ferry and train which would be cheaper
The demand of the product might fade because the substitute is cheaper so more people would buy the cheaper option (e.g.)
How might alternative brands determine the demand ?
• If an alternative brand is available and the product is not available then this will affect demand
• If customers are able to buy a similar product, with a similar brand profile then demand may be affected
For e.g. vans and converse - both similar so the demand might go down for one because the other could be similar and better
How might alternative brands determine the demand ?
• If an alternative brand is available and the product is not available then this will affect demand
• If customers are able to buy a similar product, with a similar brand profile then demand may be affected
For e.g. vans and converse - both similar so the demand might go down for one because the other could be similar and better
How might the price of compliments determine the demand for a product ?
• A complementary product is one that needs to be used with another product
• Another example is buying capsules for a coffee machine
• As the prices of these complimentary goods rise then demand for the main product falls because for e,g, you can’t really use the coffee machine without capsules so if the capsules go up in price people might not want to buy the coffee machine anymore - demand goes down
How might changes in consumer income determine the demand for a product ?
• As consumer incomes rise then demand for some products falls e.g. microwave meals – consumers may buy fresh food or eat out instead
This is the same thing the other way round as well so as consumer income falls then demand for fresh food might decrease and the demand for microwave meals might rise
How might trends and fads in fashion determine the demand for a product ?
• As trends in goods and services rise then demand for these products rise
• Trends tend to be a change in consumer preference over time e.g. Smartphones
How might marketing determine the demand for a product ?
• Marketing can also stimulate demand e.g. promotions can help to encourage sales
• McDonald’s run the monopoly promotion every year - attracts more people - people want to win money/free food so they buy McDonald’s to try and win stuff
• The marketing mix can help a business to drive traffic to a website – through a sale or an offer
• Some websites like Groupon and Vouchercloud help to increase demand
How might advertising determine the demand for a product ?
• Advertising can stimulate demand and increase sales
• Advertising can call the public’s attention to a product or service
• It can also be used to launch new products, remind customers about how good established products are and build the image of the brand
How might branding determine the demand for a product ?
Heavy branding on goods will help to increase or keep demand stable
How might population structure and demographics determine the demand for a product ?
• The UK population is getting older, this means that different products and services will be in higher demand
• Weddings are also going out of fashion which may mean that demand for wedding cakes will fall - more people would rather not have a wedding so wedding cakes will fall in demand
• The UK is also experiencing a baby boom - this will create a big demand for spaces in primary schools or a greater demand for baby products like baby powder, food, nappies
How might the time of year determine the demand for a product ?
Some products peak in demand during certain times in the year for e.g. Christmas trees, festive snacks like gingerbread.
How might weather and climate determine the demand for a product ?
• Some products have a seasonality factor and may be affected by the weather and the climate
• One example is an ice cream van’s Mr Whippy 99 ice creams
Or for example some shops put charcoal and instant barbecues outside their shops during times when it’s very hot
How might external shocks determine the demand for a product ?
External shocks such as; terrorism, war, disease and health scares can change demand
For example after terror attacks in Tunisia travel agents have found it hard to sell holidays there
30 British tourists were killed on the beach
Or for example the demand for crude oil might go up during a time of conflict because during the Ukrainian war there was a shortage of crude oil so there was big lines for diesel pumps etc so when there was a conflict people started buying more crude oil
