What is marginal demand?
In economics, the "marginal demand" is a term that is used to describe how the demand for good or service is likely to be affected by the product price. This approach is often used to reflect what would probably happen to the sale of a given product if the unit price that consumers pay is either increased or reduced. The use of a marginal demand projection helps to determine whether the change in one way or another is likely to improve the lower line or whether the current prices should remain in place.
The key to understanding the marginal demand is a firm understanding of the degree of supply and demand that currently exists for the products considered. Assuming that this demand is generally increasing, the company that produces products can speculate on the effect of the chances of prices on its market share. For examplecould get from adjusting the price down. At the same time, there may be a detected marginal demand that is revealed that the slight increase in the unit price will not have any harmful impact on the number of units that consumers buy, allowing gross profits to increase without damaging sales data.
In a competitive environment, the consideration of marginal demand may provide valuable clues in the way a company that has to compete for customers must comply with a relatively wide range of competitors to maintain the current market share and have a chance to increase its share in a limited consumer market. Here, the marginal demand is projected, if the unit prices are reduced in the specified increments, it can help reveal whether the resulting rise in sale would be sufficient to compensate for the loss of profit from each unit sold. If the calculation of marginal demand indicates that the volume of purchases made sufficiently to allow the business to eventuallyGet more revenue from this higher volume, the change in price can be justified and help to capture a larger market share.
Assessment of the marginal demand is a continued task. As a conditions within the consumer market, companies that operate on these markets must also consider the effectiveness of the current price to attract customers and maintain demand to an acceptable extent. For this reason, the company tends to regularly evaluate market conditions, consider their current price strategies with regard to these new circumstances, and then reflect what would happen if specific changes in the prices were made.