This topic examines the nature of factors that affect what people buy and how much. These factors can be categorised into controllable and uncontrollable by managers. The first category relates to internal factors to the firm and involves the marketing mix. The second category relates to external factors in the business environment. A mathematical framework of analysis is required to quantify the effects of the different variables. This involves the use of demand functions or equations, which are often in a linear or power form. The linear form entails the coefficients of explanatory variables representing the marginal effects of those variables. The power form entails the coefficients or powers of the variables representing elasticities. There is a discussion of the factors determining various elasticities and their interpretation. The importance of elasticities in economic analysis is explained, in terms of managerial decision making and forecasting. The focus is on the application of concepts in demand theory to real-life situations, and the performance of the necessary calculations to make decisions and forecasts. Many solved problems are presented as an aid to this process.