The analysis of demand theory is very much important in the business decision. Demand analysis helps firm forecast the market which is of importance in the modern business activities. It helps to design the appropriate pricing policy.
In the present global market, it is not at all possible for a firm to exist without adequate knowledge on consumer behavior. Consumer behaviour informs determines demand for a commodity in the market. The importance of demand analysis is below.
1) Pricing Policy:
The importance of demand analysis in business decision is that it helps firms design their pricing policy. Firm can choose either to lower or raise a product’s price by observing trend of consumer demand for that product. Producers can’t fix price for their products without first understanding the market demand for them.
2) Investment Policy:
Demand analysis helps firm adopt appropriate investment policy. Based on the nature of demand for a particular product in a particular market, firms can make their investment decisions.
3) Market forecast:
Demand analysis helps business firms in their investment decisions, based on the prevailing response of consumers towards a particular commodity, firm can foresee the demand. This in turn helps them in investing on an appropriate industry.