Importance of Demand Analysis in Business Decision Making | Microeconomics

Importance of Demand Analysis in Business Decision Making
Demand | Microeconomics
Management Notes

The quantity of goods and services that consumer are willing and able to purchase in the market at various prices during a period of time is called demand.The proper analysis of demand is very much important in Buisness Decision making because of the following reasons:

  1. To Forecast Sales: Proper Market study helps the firm to maximize its profit.Market study helps to analyze demand for the commodity and factors influencing it. This in turn helps to forecast sales of the product.
  2. To determine Profit: For any business,the main objective firm is to maximize profit. Profit can be maximized when sales volume increases. Sales volume depends upon the market demand. So, demand analysis helps to determine profit.
  3. To make marketing decision: Demand analysis helps to understand about the different factors that affects the demand for a product. The adverse effects of these factors can be minimized through advertisement and sales promotion efforts.
  4. To make production decision: The amount of production not only depends upon cost and technology of the firm but also depends upon demand for the product. If the demand is in increasing trend the producers should have to prepare to increase in production and vice-versa.
  5. To make financial decisions: On the basis of market demand of the product the firm should make their financial decision or investment decision. It is in the sense that increasing trend of demand indicates that producers should have to increase financing in the firm.

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