Demand, a chief economic principle, is the effective want for something and the willingness and ability to pay for it. A relative concept, demand is always attached to a certain price point at a particular point in time. Quantitative demand analysis provides useful guidance to companies and investors trying to determine their market strategy and the growth potential of a product. There are two basic types of demand: individual and market. While both principles overlap in many ways, the scope of individual demand is much narrower than market demand.
The individual demand is the demand of one individual or firm. It represents the quantity of a good that a single consumer would buy at a specific price point at a specific point in time. While the term is somewhat vague, individual demand can be represented by the point of view of one person, a single family, or a single household.
Market demand provides the total quantity demanded by all consumers. In other words, it represents the aggregate of all individual demands. There are two basic types of market demand: primary and selective. Primary demand is the total demand for all of the brands that represent a given product or service, such as all phones or all high-end watches. Selective demand is the demand for one particular brand of product or service, such as the iPhone or a Michele watch. Market demand is an important economic marker because it reflects the competitiveness of a marketplace, a consumer’s willingness to buy certain products and the ability of a company to leverage itself in a competitive landscape. If market demand is low, it signals to a company that they should terminate a product or service, or restructure it so that it is more appealing to consumers.
Factors Influencing Demand
There are several factors that influence individual and market demand. Individual demand is influenced by an individual’s age, sex, income, habits, expectations and the prices of competing goods in the marketplace. Market demand is influenced by the same factors, but on a broader scale—the taste, habits and expectations of a community and so on. It also considers the number of buyers in the market, the rate at which a certain community is growing and the level of innovation erupting in the marketplace. Market demand can be measured on an international, national, regional, local, or even smaller level.
Note that where you have a sizable market demand for a product or service, there may be several individuals included in the market who won't buy the service or product. Often, companies will use several pieces of demographic information to parse out very specific subsets of the market they wish to target, such as middle-income middle-aged stay-at-home mothers or urban youths in coastal metropolises. In a monophonic market, where there is only buyer, individual demand and market demand collapse. Since the market encapsulates one person, that individual represents the entire market.
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