Explain the four ways demand in business markets differs from demand in consumer markets.
What will be an ideal response?
DERIVED DEMAND. The demand for business-to-business products is derived from the demand for consumer products. This is because organizations buy products to be used directly or indirectly in the production of consumer products. Therefore, firms must carefully monitor demand patterns in final consumer markets.
INELASTIC DEMAND. The demand for business-to-business products tends to be price inelastic. This means changes in price will not significantly affect demand for the product (unlike consumer markets).
JOINT DEMAND. Most business products involve the combination of many components into a final product. Joint demand occurs when two or more items are used in combination in a final product. The text provides an example of microcomputer disk drives and memory chips. Joint demand is much more common in business markets.
FLUCTUATING DEMAND. The demand for business products tends to be more unstable than the demand for consumer products. The multiplier effect explains how a slight change in consumer demand can result in a significant change in demand for business products.
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