Necessity Index
In the top section of the report, the necessity index of the product is
displayed next to the product picture. A high index value indicates that the
product is necessary to people in their daily lives. The demand for necessary
goods is fairly constant, because people must buy them even if the price
they are offered is not attractive.
Conversely, the demand for non-necessary goods is influenced mainly by the
attractiveness of the goods. Therefore, cutting the price does not always
result in decreased profit, because the lower price can stimulate demand.
This increased demand could offset or even surpass the reduced profit
margin.
Essentially this means that the higher the necessity index number for a product, the less price sensitive the consumer is. In contrast, reducing the price of a low necessity product could possibly lead to more sales (depending largely on how much of a concern price is), but almost certainly there is a negative trade off of lower profitability if the price of that good is raised. So in essence, necessity is sort of an expression of the ability to overcharge for a product and is very closely linked with price dynamics. Its sort of an expression of price elasticity.
Side by side with necessity is demand, which is simply an expression of the annual demand from a single consumer for the product on average. So in your example, each consumer buys on average a motorbike every 100 years and a car every 71.4 years. I'm not sure how Enlight translates city population into consumers though, that may be a question for David.
Also it is very important to divide the concepts of revenue (sales) and profit, the two are not the same at all. Whilst generically a high necessity product will also be more profitable, the core profitability of the product is actually set within the price of the product itself. Typically when I balance out my mod I like to make sure that the more and also less profitable items are vaguely in line with the dynamics of real life. An example of how this works and the tools I use to do this are below:
This calculator works out the cost of the various inputs, allows a markup to be set and then spits out a recommended price. This price that you are setting (in product types) is then the core price for the product and will be the standard price used to determine the base retail price for the product in different cities (markup or down) and therefore the overall rating. The reason why the markups seem so high is to allow for employee, building and freight costs and is largely built from the experience of how different markups function in game.
See below from the manual on standard price and overall rating:
Calculating the Overall Rating
Since the overall rating is calculated automatically by the game, you don’t
need to understand how it’s calculated. The following formula is for your
reference only.
QR is the quality rating.
QC is the quality concern.
BR is the brand rating.
BC is the brand concern.
StdPr is the standard price
NOTE: Each has a predefined standard price. It is for the internal calculations only and is not
displayed.
In summary then:
Demand = Number of units bought by each consumer every year (Primary effect: Revenue)
Necessity Index = How necessary the item is (Primary effect: Price elasticity -> Revenue + Profitability)
Product price = Standard price of the item (Primary effect: Core profitability) - set in product_types file
The conclusion is simple; if you want higher sales, push demand up, if you want better price elasticity (and therefore potentially higher profitability or at least more dynamic sales) push necessity up and if you want higher profitability for the product itself, then put its standard price up.