Demand Analysis

Demand analysis is a type of study done by businesses to better understand client demand for a specific item. It is commonly used by businesses to analyse if they can join a market & profit as planned. Throughout this phase, management makes decisions about allocation of costs, production, marketing, and pricing, among other things. 

A new company may quickly determine whether there is a big competition in the market they offer, as well as learn about number of rivals, the industry’s growth, and etc. Entrepreneurs may use demand analysis methodologies to figure out which of their primary business sectors has the most demand.

Low quantity demanded suggests that this does not meet the demands of customers and may be of little value to them. Low demand can be caused by product incompatibility with market, bad digital marketing, rivals offering better alternatives, and so on. 

The capacity to recognise and serve consumers’ requirements determines a company’s successes or failures. Every firm in today’s market must understand consumer behaviour and keep inventories in line with it. Demand analysis provides a wealth of information that can help you make better decisions. Companies get knowledge that is important for sales forecasts, product pricing, marketing and advertising expenditures, financial choices, and manufacturing after performing research. 

Multiple Choice Questions

Q.1 What are the assumptions of law of Demand?

1. 1. Income Remains Unchanged 
   2. Price of related goods is changed 
   3. Changes in credit facilities 
   4. A change in Taste and Preferences 

Answer = A. Income Remains Unchanged  

Q.2 What shows the functional relationship between quantity demand and its determinants?

1. 1. Government Policies 
   2. Taste and Preferences 
   3. Price of related Goods 
   4. All of the Above 

Answer = D. All of the Above 

Q.3 How does Tastes and Preferences of consumer directly influence the demand for a commodity?

1. 1. Changes in Fashion 
   2. Changes in price of the overall market 
   3. Changes in the Consumer’s behaviour
   4. Changes in the Supply of a commodity 

Answer = A. Changes in Fashion  

Q.4  What is expansion in Demand Curve?

1. 1. Rise of Demand due to rise of the supply
   2. Rise of Demand due to the Decreasing of the Price
   3. Deduction in Price, Lowering Demand 
   4. Rise in Demand and Rise in Price  

Answer = B. Rise of Demand Due to Decreasing of the Price 

Q.5  According to the law of demand, a rise in the price of a good:

1. 1. Increases the quantity of that good available
   2. Reduces the quantity of that product desired.
   3. Affects the quantity of that good available.
   4. All of the options.

Answer = B. Reduces the Quantity of that product desired 

Q.6 Which one of the following causes a movement in watch demand to the right?

1. 1. A rise in the value of watches
   2. None of these responses are correct.
   3. If watch cells & watches are complementary, the price for watch batteries will drop.
   4. If watches are a common good, there will be a fall in consumer income. 

Answer = C. If watch cells & watches are complementary, the price for watch batteries will drop

Q.7 If a commodity’s price is higher than its equilibrium price, 

1. 1. There is indeed a surplus, which will cause the price to climb.
   2. There seems to be a scarcity, and prices will drop.
   3. There will be a scarcity, and prices will rise.
   4. The amount required and provided are equal, as well as the prices stay unchanged.
   5. A surplus exists, as well as the price will drop.

Answer = E. A surplus exists, as well as the price will drop

Q.8 Which is unquestionably not a case of pricing discrimination?

1. 1. In a movie theatre, children are charged less than adults.
   2. Universities charge out-of-state residents a higher tuition rate.
   3. A doctor bases his or her fees on the income of his or her patients.
   4. During the off hours, while production costs are lower, an electricity generation company will charge very little for electricity utilised.

Answer = D. During the off hours, while production costs are lower, an electricity generation company will charge very little for electricity utilised

Q.9 When new businesses join a monopolistic competitive marketplace, the current firms’ demand curves will:

1. 1. Move to the left to become more price inflexible.
   2. Shift towards the left as well as the price elasticity will remain unchanged.
   3. Move to the left to increase price elasticity.
   4. Rightward shift, and the price elasticity will remain unchanged.

Answer = C. Move to the left to increase price elasticity

Q.10 Assume that a country wishes to get rid of the resource wastage that comes with excess capacity. in marketplaces that are monopolistically competitive Which one of the following measures would be most effective in achieving this goal?

1. 1. Allow monopolistic competitive businesses to erect higher entry barriers.
   2. Encourage greater competition in the marketplace that are monopolistically competitive.
   3. Ensure that all enterprises in a monopolistic competitive market produce similar goods.
   4. Make it mandatory for all enterprises in a monopolistic competitive market must charge the very same price.

Answer = C. Ensure that all enterprises in a monopolistic competitive market produce similar goods

Q.11 Which of the following best illustrates a demand curve?

1. 1. Inside an ideal world, the amount of merchandise that people would want to purchase.
   2. The amount of product that customers are prepared to sell
   3. The amount of goods customers are inclined to purchase at every income level, all other factors remaining constant.
   4. The amount of product that customers are willing to buy at any given price, all other factors being equal.

Answer = D. The amount of product that customers are willing to buy at any given price, all other factors being equal

Q.12 The law of declining marginal utility states:

1. 1. With first unit, utility is at its peak.
   2. Increasing the number of units consumed raises the marginal utility.
   3. As even more units are used, the marginal product will decrease.
   4. As even more unit are used, utility will grow at a slower pace. 

Answer = D. As even more unit are used, utility will grow at a slower pace

Q.13 For a standard good:

1. 1. The demand elasticity of pricing is negative, and so is the demand elasticity of income.
   2. The demand elasticity of price is positive, whereas the demand elasticity of income is negative.
   3. The demand elasticity of price is negative, but the demand elasticity of income is positive.
   4. The demand elasticity of price is positive, as is the demand elasticity of income.

Answer = D. The demand elasticity of price is negative, but the demand elasticity of income is positive

Q.14 The term “product differentiation” relates to the following:

1. 1. Characteristics that distinguish one product from competitors in the same market.
   2. In a given market, different pricing for same commodity.
   3. The sale of identical goods in several marketplaces.
   4. Charging various pricing in different marketplaces for the same goods.

Answer = A. Characteristics that distinguish one product from competitors in the same market

Q.15 The term “price elasticity of demand” refers to the ability of a market to respond to changes in its

1. 1. The difference between the changes in quantity required and the percent change in revenue.
   2. The difference between the percentage change in revenue and the percentage changes in the quantity requested.
   3. The % change in the amount demanded of a product divided by percentage change in quantity required of a good, a change in the cost of the item
   4. All of the options.
   5. The % change in an item’s price divided by the change in demand for that good.

Answer = C. The % change in the amount demanded of a product divided by percentage change in quantity required of a good, a change in the cost of the item

Q.16 The seafood market is fiercely competitive. As a result, the price elasticity for just a single fishery

1. 1. The elasticity of demand for fish is sometimes larger and sometimes less than the elasticity of demand for fish as a whole.
   2. Higher than the total elasticity of fish demand.
   3. Lower than the general elasticity in demand for fish.
   4. Equals the overall elasticity in demand for fish.

Answer = B. Higher than the total elasticity of fish demand