DEMAND THEORY

Business is driven by demand, a firm will not be established or will survive if adequate demand is not there. Hence, it is important to understand factors affecting demand.

Consumer Demand Theory

This theory postulates that the quantity demanded of a commodity is a function of the price of commodity, the consumer’s income, the price of substitutes and complementary commodities and the taste of the consumer.

Qdx = f ( Px, T , Py , T )

Qdx = Quantity demanded of commodity X an individual per time period.
Px = Price per unit of commodity X
I = Consumer’s Income
Py = Price of related ( i.e Substitute and complementary) Commodities
T = Taste of the consumer

Price Elasticity Of Demand

The responsiveness in the quantity demanded of a commodity to a change in its price is very important to the firm. Sometimes lowering the price of the commodity increases sales sufficiently to increase total revenues. Thus price elasticity of......

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Title: Cadburys
Approximate Word Count: 1385
Approximate Pages: 6 (250 words per double-spaced page)

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