Demand Analysis

Abstract

No firm is likely to remain in business for very long and make a profit unless it has some knowledge of the demand conditions facing it. Without such knowledge it will not know how much it can expect to sell of each product and thus the likely scale of output, nor whether or not it is likely to make an acceptable profit, given expected cost levels. Contrary to the impressions fostered by many forecasters, prices are not solely determined by costs but also by the interaction of supply and demand. This chapter discusses some of the basic economic concepts of demand, the characteristics of demand in differing economic circumstances, and briefly touches on forecasting methods.