Download Demand_ Identifying what consumers want and need File

Identifying what consumers want
and need (Demand)
AS Business
Unit 1
Lesson Objectives
• To be able to identify the factors that affect demand in a
market
• To be able to discuss in the interaction between supply and
demand
• To be able to draw diagrams which illustrate the interaction
between supply and demand
• To be able to discuss the benefits of market orientation
• To be able to answer a past paper question based on the
theory
Starter
• When you go to the shops to buy something –
what changes your mind about what to buy?
• Weather? Trends?
LO: To be able to identify the factors that affect demand in a market
Answers to starters?
• What affects your
demand as a
consumer?
• Maybe you said
weather, personal
circumstances
(pregnant need
baby clothes), but
how about trends?
Loom bandz the current trend, but
will it be popular next year?
LO: To be able to identify the factors that affect demand in a market
Definition of demand
• Demand is the amount of goods and/or
services a consumer is willing to buy at a given
price.
LO: To be able to identify the factors that affect demand in a market
Section 1 – factors affecting demand
Factors affecting demand - population
• Population structure is an
important determinant of
demand
• Current aging population
what kinds of new products
and services might be
demanded?
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand - tastes
• Tastes – discuss how mobile phone market is
influenced by taste.
• Consider ages of children having phones – has this
created new demand with new social norms?
• When you are a parent do you intend to give your
child a phone?
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand - substitutes
• If you wanted coffee from a
machine but that was
broken you would then
maybe want tea. If the tea
was also broken you would
have hot chocolate because
you want a hot beverage and
these goods are substitutes
for each other.
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand –
complimentary goods
• If you buy this blue ray player….
You need to buy the
disks for it
And you may wish to
buy other
Goods to go with it…
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand – non price
competition
• This is where companies seek to get competitive
advantage over a rival company (Pepsi vs Coke)
by using anything other than price (Why? Price
war?) Companies want to stimulate demand AND
enjoy healthy profit margins
• Quality
• Innovation
• Differentiation
• Promotion
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand - incomes
• You get paid – which is nice
• Then you have to pay your bills like rent and
food (can you think of any other regular bills?)
• What is left is called disposable income
• As your disposable income rises you will
demand more NORMAL goods and some LUXURY
goods
• As your disposable income gets lower you will
demand more INFERIOR goods
LO: To be able to identify the factors that affect demand in a market
Factors affecting demand
(anything other than price; tastes, population etc)
Price
D1
D
D2
Quantity
Factors affecting demand - price
• Ever been in a sales
frenzy?
• Ever queued for the
next sale? Was it
worth it?
• Ever waited until an
item was discounted
until you bought it?
• Daily mail article about
sales frenzy
Factors affecting demand - price
Price
Demand curve
Quantity
Section 2 – interaction between supply
and demand
Supply
• The quantity of goods supplied will rise as the
price rises.
• The market is a profit signalling mechanism –
as profits are made new companies enter the
market and supply to customers
• Making goods that are demanded is the best
way to make a profit
Supply
Price
Supply curve
Quantity
More profit – more producers enter
the market:
Price
s
s1
Quantity
Equilibrium point
Price
P1
P
P2
Q
Quantity
Quiz
Changes in demand and supply
does curve go right or left?
1.
2.
3.
4.
A Fall in supply
A fall in demand
A Rise in supply
A Rise in demand
Section 3 – benefits of market
orientation (progress)
Benefits of market orientation?
• Product orientated
• Company produces what
they are good at producing
and hopes that the
customer will buy
• Model T ford – all same, all
black
• Market orientated
• Company produces what it
thinks that the customers
want and need, based on
their specific demands
• Modern car companies,
new cars can be ordered in
a rainbow of colours and
features
Sample question 1
Answer question 1
Answer is A
Defines Market orientation is showing a sensitivity to
customers’ requirements (1 mark)
- Such as producing fuel efficient cars/cars with
technology (1 mark)
- Which therefore increases the likelihood of a sale
(1 mark)
Up to 2 of the marks above can be achieved
alternatively by explaining distracters, e.g.
- D will cause costs/prices to increase, which will
reduce production/demand. (1 mark)
Sample question 2
Answer question 2
Answer C
Defines demand as the amount consumer are willing and able to but at
a given price (1 mark)
- If a young adult returns to their parental home they would not have a
home of their own (1 mark)
- Which would mean that they would not be using as much electricity/
a share of an increased overall electricity bill would be now used (1
mark)
Up to 2 of the marks above can be achieved alternatively by
explaining distracters, e.g.
- Moving back home might actually give them more disposable income
(1 mark), which might increase demand for alternative products such
as clothing/computer games (1 mark)
- Clothing is a necessity so demand is unlikely to fall (1 mark)
Sample question 3
From second half of the paper after cup cake
case study
Explain two factors that could affect demand for
Anna’s Cakes [6]
Answer question 3
Knowledge 2, Application 2, Analysis 2
Knowledge: up to 2 marks are available, e.g. for describing what is meant by
demand/demand factors – the amount of product/service which people are
willing and able to buy at a given price, at a given time OR lists factors such as
income, taste, fashion, demographics, marketing aspects (location, product,
advertising), price of substitutes/complements OR refers to data in chart
Application: up to 2 marks are available for relating the above to Anna, e.g.
the number of weddings (reference to fig 1), Anna’s reputation for baking
delicious cakes, growing number of corporate events, endorsement by Vogue
magazine.
Analysis: up to 2 marks are available for providing
reasons/causes/consequences, etc. e.g. if there is a recession, then typically
incomes fall and the demand for luxury products like cakes tend to fall.
Fewer marriages may mean fewer receptions which may lead to a decline in
the demand for her wedding cakes.
Both factors needed for full marks (max 3 marks for one factor explained)