To be the best in your field is the dream of every entrepreneur and the head of the company, the enterprise. However, to achieve these goals, it is not enough to be able to make a qualitative proposal. It is very important to know the law of demand and use it professionally.
What is the law of demand?
The law of demand has three economic effects:
- substitution;
- income;
- increased benefits.
The law of demand is an economic law that says there is an inverse relationship between the price of a commodity and the amount of demand. At the same time, demand should be determined by the buyer's need for a specific service or product. The law can also show such a feature as a gradual decline in consumer demand, which indicates a decrease in the number of purchases of goods, which occurs not only because of rising prices, but also because of increased requirements.
What is the essence of the law of demand?
Knowing what the law of demand expresses, you can easily navigate the situation in the markets and even outrun competitors. In accordance with the law of demand, an increase in market prices for certain services can reduce the volume of demand, while a lower market price, on the contrary, will increase demand. So, the law of supply and demand often determines the behavior of a potential consumer in the markets.
The law of demand in the economy
Under the law of demand, it is customary to understand the relationship between a certain quantity of products that a person wants to acquire, and its value. Simply put, if funds are available, the buyer will be able to get more or less products depending on low or high prices. The law of demand in the economy is a process associated with changes in product prices and people's incomes. So, with the growth of profitability, the demand grows. When the price rises, the possibility of purchases decreases.
Law of Demand in Marketing
He plays an important role in planning marketing. The law of demand reflects the desire and ability of a person to purchase a product, or to order a service in a certain place. The magnitude of demand for the goods will be determined by such factors:
- The need of man in this product.
- Consumer income.
- The price set for the product.
- The consumer's opinion on the future of his economic welfare.
The strategy of the enterprise should be reduced to causing a desire to purchase the goods that it produces. At the same time, the potential buyer can be influenced by "playing" on the attractiveness of the goods. Demand is the total volume of products that can be purchased by a specific consumer group for a specific period under a certain marketing program.
The law of demand in the labor market
To achieve success in their business, managers of enterprises and companies must understand the dependence that the law of demand on the labor market reflects. Demand here is the amount of labor that potential employers want to hire at a given time at a certain rate. The demand for labor will depend on:
- Needs of production.
- Productivity of labor.
It is important to understand that the performance will depend on:
- Qualifications of the employee himself.
- Used in production technologies.
- The volume of fixed capital.
- Amount, quality of natural resources.
- Production management.
The greater is the need for production in the creation of new products, the higher will be the demand for human resources, that is, labor. The higher the productivity, the lower the demand for labor. The main feature of the labor market is that wages are formed as the main income. According to the law of demand for labor, the smaller the wage, the greater the demand for labor.
The causes of the violation of the law of demand
The most common reasons for breaking the law of demand:
- Rising prices for the main group of essential goods may lead to a rejection of better and more expensive ones.
- Price - the quality index.
- The Veblen effect is associated with the prestigious demand, which is focused on the purchase of goods related to goods-benefits.
- The expected price dynamics.
- Sale of rare expensive goods, which can be a means of investing money.