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NIOS Class 10 Warehouse Principles & Inventory Management Chapter 16 Meaning of Supply and Demand
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Meaning of Supply and Demand
Chapter: 16
Intext Questions 16.1
(i) What is the Opportunity Cost?
Ans: According to the dictionary, opportunity cost means the loss of other alternatives when one alternative is chosen. In economics terms, it means the benefits an individual, investor or business misses out on when choosing one alternative over another.
(ii) What are the factors of Production?
Ans: Land, Labour, Capital, and Entrepreneur.
Intext Questions 16.2
(i) Note on Demand Curve.
Ans: Demand curve, in economics, a graphic representation of the relationship between product price and the quantity of the product demanded.
(ii) What is Elasticity of Demand?
Ans: The degree to which rising price translates into falling demand is called demand elasticity or price elasticity of demand.
Intext Questions 16.3
(i) What is Supply?
Ans: Supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.
(ii) Name the determinants of Supply.
Ans: Cost of production, Taxes and Objectives of Firms.
| Terminal Exercise |
1. At a given quantity, the maximum price that buyers are willing to pay is equal to the lowest price that retailers are willing to accept, the market has achieved its equilibrium quantity.
Ans: When at a given quantity, the highest price that buyers are prepared to pay is equal to the lowest price that sellers are ready to agree to take, the market has grasped its equilibrium quantity. On the other hand, when the quantity those buyers are willing and able to purchase at a particular price is just equal to the quantity that sellers are willing to move at that similar price the market has seen the equilibrium price. So, equilibrium price and quantity are reached simultaneously, and the supply curve nor the demand curve shifts, there is no shift for either price or quantity to vary from their equilibrium values.
2. Supply is the willingness of dealers to offer a given quantity of a good or service for a given price.
Ans: Supply is the willingness of dealers to offer a given quantity of a good or service for a given price. It represents the relationship between price and the quantity of a product that producers are willing to sell in a market. Supply considers the entire market and factors influencing production, such as technology, costs, and government policies.
3. The two categories of demand are Independent and Dependent Demand for inventories.
Ans: This distinction is vital because the inventory management methods and processes differ for both categories. The finished goods inventories which are characterised by Independent demand, are achieved with sales order and supply chain management developments, which is based on sales forecasts, the dependent demand for raw materials and apparatuses to manufacture the finished goods is managed through MRP – Material Resources Planning.
4. Explain the factors affecting shift in Demand.
Ans: The following shifts reduction demands:
(i) The reduction in the price of a substitute.
(ii) A rise in the price of a complement.
(iii) The reduction in income, if the good is normal good.
(iv) Increase in income, when good is inferior good.
5. What is Market Equilibrium?
Ans: Market equilibrium refers to a situation where quantity demanded and quantity supplied of a good are equal. In other words, market equilibrium is a situation of zero excess demand and zero excess supply.
Quantity demanded = quantity supply Equilibrium point = point of intersection of demand and supply curves.
6. When does the supply curve shift left? Why?
Ans: A positive change in supply when demand is constant shifts the supply curve to the right, which results in an intersection that yields lower prices and higher quantity. A negative change in supply, on the other hand, shifts the curve to the left, causing prices to rise and the quantity to decrease.
7. How does demand planning help overall business planning?
Ans: Demand planning, which creates part of an overall inventory planning strategy and impacts other functional processes of an organisation, is just one element – though an important one – within demand management.
Benefits of demand planning are discussed below:
(i) Increased in-stock availability-All season ready stock.
(ii) Better view of demand swings helps in building effective marketing strategies.
(iii) Cohesive, seamless relationship between all tiers of supply chain, leading to greater visibility of processes.
(iv) Better revenue.
(v) Lesser wastage of stock.
(vi) Flexibility to adapt to regular market changes.
(vii) Better assortment and allocation across all stores and channels.
(viii) Improved productivity of planners across all tiers of the supply chain.
8. How can the business forecast its future demand in Supply chain Business?
Ans: The following techniques can support demand planning in supply chain business:
(i) A Materials Resource Planning (MRP) system can provide for the demand planning process, MRP can be described as a system for supplying the number of components required to produce a known quantity of finished assemblies.
(ii) Economic Order Quantity formula (EOQ) attempts to reconcile the problem of storage cost and ordering cost and to ascertain the order quantity which will minimise both.
(iii) Economic aspects of stock management may be concluded through an analysis of the costs incurred in obtaining and carrying inventories.
9. Explain any two techniques which help the demand planning of Inventory Management.
Ans: Some other strategies followed to have effective inventory management:
(i) Product life cycle management is to analyse the factors contributing demand for other products.
(ii) Replenishment planning to ensure on the right place on the right quantities.
(iii) The increase in real- data availability, some of it transmitted by IoT sensors and more analytical through machine learning processes, makes future demand planning more effective.
(iv) At the same time, data from mobile devices and cloud- based information makes the future of demand planning more robust.
