Economics

Difference Between Industry Demand And Company Demand

Demand is classified into two types,namely, (a) Industry demand and (b) Company demand. (a) Industry demand means the total or aggregate demand for the products of a particular industry. For instance the total demand for sugar is fulfilled by the sugar industry. The various sugar mills in sugar industry produce such quantity of sugar which can be demanded by the people at a particular time.

(b) Company demand refers to the demand for the products of a particular company in an industry. An industry consists of different companies producing a commodity with different brand names and trade marks. For instance, the soap industry consists of several soaps manufactured by different companies Unilever Limited, Godrej etc. are some of the leading companies which manufacture different varieties of soaps.

Industry demand consists of the aggregate demand made for the product of different companies. Industry covers all the firms or companies which produce close substitutes for a single product with different brand names.

For instance there are several companies manufacturing toothpaste like CloseUp, Colgate, Promise, Neem etc. All these companies come under the category Of single industry namely tooth paste industry. Industry demand schedule can he constructed on the basis of the total quantity of a commodity bought from all firms at a given price and time. It can be divided into several groups like customer group wise or area wise.

The business manager 0f each firm estimates the share of’ the product of a company in the total industry demand. However, he has to consider industry demand for estimating and forecasting the sales of the company. The nature of competition prevailing in the market determines the relationship between the industry demand and company demand. This is explained as follows:

1.Monopoly: In Monopoly there exists no difference between firm and industry. So there exists no difference between company demand and industry demand.

2. Homogeneous Oligopoly : The company demand is uncertain in oligopoly where there are few sellers and homogeneous products. The reason is that business is transferable between different companies.

3. Oligopoly with product differentiation : The company demand is not closely related to the industry demand in oligopoly with product differentiation. Each company adopts its own technique with regard to quality, advertisement, prices etc. for influencing its demand by the consumers.

4. Pure-competition : When competition is pure, a single seller is only a price taker and not a price maker. He has no influence on the market price. He sells any quantity of commodities at the prevailing price. So the demand curve in pure competition is a horizontal straight line.

5. Monopolistic competition:  Monopolistic competition consists of related products. The firm in this competition will not consider the industry demand as an important one. It gives importance to the company demand only. The demand for its products are influenced by the action of the rival companies.

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