Types of Demand 

A classification of demand for goods and services is essential to make a meaningful demand analysis. Numerous goods and services available in an economy can be classified on different grounds. 

(a)    Demand for Consumers' Goods and Producers' Goods

Goods and services used for final consumption, like food items, clothes, services of doctors, and residential houses are called consumer-goods. Demand for these goods depends mainly on the disposable income of the consumer, price of goods and size of the population. Demand for consumer's goods is also called as direct demand. Direct demand is the demand for goods meant for final consumption.

Producers' goods or capital goods refer- to the demand for goods required for production of other goods. This is also known as derived demand as it is derived from or tied to the demand for consumers' goods they produce. Demand for raw materials, plant and machinery and a car to be used as a taxi is demand for producers' goods. Their demand varies with the level of production. Thus, the demand for an input/factor of production is a derived demand as it depends on the demand for final output. The derived demand for an input can be assessed on the basis of quantity of demand for the final output and the degree of substitutability / complementarily between inputs. For example, the demand for sugar in a soft drinks industry depends on the quantity of soft drink to be­ produced and substitutability between sugar and high fructose corn syrup (HFCS).

                   Table.3.1: Classification of Demand

 (b)   Demand for Perishable and Durable goods

Both the consumers' and producers' goods can be further classified into perishable (non-durable goods) and durable goods. Perishable goods are single ­use goods whose utility perishes after using them only once. Cold drinks, pizzas, cement and services of teachers are such examples. Durable goods are repeated use goods like clothes, car and machinery. They can be used repeatedly and continuously over a period of time.

Durable goods present more complicated problems for demand analysis than perishable goods. Perishable goods meet only the current demand but sales of durable goods depend on both current as well as future demand. Demand for them depends on their current prices, income and preferences of the consumer. Durable goods are more costly and their demand can be preponed or postponed depending on the market conditions. They are demanded to replace old stock and to expand the total stock. Credit facilities, technological changes, business conditions, speculation and price expectation are some factors that influence their demand. 

(c)     Individual and Market demand

Individual demand is demand by a single buyer in the market at a particular price per time period. Market demand is the demand by all the buyers of a particular good or service in the market. In other words, it is the aggregate demand of individual buyers of a specific product at a particular price per time period (discussed in detail in section 3.5). This distinction is helpful for formulating sales strategy for different income groups. 

(d)    Demand by Market Segments and Total Market

Individuals can be grouped in a market segment on the basis of some criteria. Distinction can be made in terms of income, product use, age, geographical regions different distribution channels and so on. If any of these differences is important in terms of prices, profit margins, seasonal pattern, competition and cyclical differences, then it is worthwhile to make the distinction, as market strategies can be formulated for each market segment. Segmenting helps the companies to focus on a particular area. Case 3.1 depicts market segmentation done by major mobile phone companies on bases of (a) consumer preferences, and (b) consumer incomes.

The total market demand will be aggregate demand for the product from all segments while market segment demand would refer to demand for the product in that specific market segment. The Apollo Tyres segments the tyre market on various basis as shown below and caters to such segments with differentiated products:

Geographical criteria - XT 9 is launched for trucks in the south and west India while Flash is made for the northern region.

Application criteria - Amar front wheel tyre to be used in southern India Rock master for mining and Haulag for underload applications

Mileage and loading criteria - Hercules for meileage mileage overloading application Milestart XT 7 for high mileage and medium load 

(e)    Company Demand and Industry Demand

Industry demand denotes the total demand for the products of a particular industry Cars in India are manufactured by MUL, Daewoo, Hyundai, Fiat and others companies. Demand for Maruti cars is company demand or firm demand r whereas demand for cars produced by all firms is industry demand, In other words, it includes the demand for differentiated products produced by all the companies that are close substitutes. Similarly demand for refrigerators produced by Whirlpool or BPL or Samsung is company demand and their aggregated demand (for a11 brands) is industry demand. The main factors influencing company demand are technology, market leadership and financial position.

Market share is the expression of company demand as a percentage of industry demand Therefore, market share is a relative term and company demand is an absolute concept. Managers are concerned with the market share of the company as it is under the control of the firm. Differentiation, promotional schemes and other methods can be adopted to increase the market share of the company 

(f)     Autonomous and Induced Demand

Autonomous demand is independent of demand of any other good whereas induced demand for a product is tied to the purchase of a parent product. Induced demand is also called as derived demand as it depends on the demand of the final output. Demand for basic needs like food, clothing, and shelter is autonomous demand. Demand for raw materials, machines, money, labour and managerial ability come under the purview of induced demand. Demand for tyres is induced demand as it depends on the automobile industry. 

(g)    Short-Run and Long-Run Demand

Distinction is made between short and long run demand on the basis of time element (refer section 1.6.4 for detailed explanation). Short run demand refers to the current demand which is based on the prevailing tastes and technology and influenced by a change in the prices and income. Demand for seasonal goods like cold drinks and ice creams is short run demand Long run demand is the demand likely to exist in future. It depends on product improvement and changes in tastes and technology overtime. This distinction is useful in control and management of demand. 

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