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Posted on April 12th, 2014, by

2) What are law of demand/supply?

The law of demand and supply holds the premise that the relationships between the demand and supply are closely intertwined and may affect the marketing performance of organizations and situation in the market at large. In practice, the law of supply and demand means that companies supplying products and services to the market aim to meet the demand since without demand there is no point in supply. Therefore, the demand engenders the supply. However, the major problem of many companies is how to meet the existing demand and supply as much products and services as customers need and not more products or services than they need. The change in the supply and demand leads to negative effects either for companies or customers. For instance, if companies fail to forecast the demand accurately, they may supply the excessive amount of products and services that customers will never need. As a result, companies will invest in the production of goods or service but they will have difficulties to sell them. In such a situation, companies will have to decrease the price of their products or services to stimulate customers to buy them. On the contrary, the high demand and the low supply create the deficit of products or services in the market. As a result, customers need products or services badly, while companies fail to supply the sufficient amount of products or services. As a result, customers suffer from the lack of supply, while companies can raise the price of their products or services as long as customers can afford paying the higher price. As the price increases, the number of customers able to afford buying products or services in demand decreases.

3) The concept of efficiency within the interaction between firms and the consumers

The efficiency is one of the key concepts in the interaction between firms and the consumers. Firms are interested in consumers since the customer loyalty and interest of customers to the firm defines the position of the firm in the market. On the other hand, customers are interested in reliable companies that can supply goods or services of the high quality. In such a way, the interaction of firms and consumers is based on mutual interest of firms and consumers. At the same time, the efficiency contributes to the development of the positive interaction between consumers and firms. The higher is the efficiency of interactions between firms and consumers the more successful become firms and the more satisfied become consumers. What is meant here is the fact that the high efficiency of the interaction between firms and consumers contributes to the improvement of the financial performance and marketing position of firms, while customers grow more and more satisfied with the quality of goods and services firms supply to them. As a result, the efficiency of the interaction between firms and consumers defines the marketing position of firms and the customer satisfaction.

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