18 Questions
Why is demand estimation and forecasting needed?
To predict the future demand and assess its effect on the operation of the firm/market.
What are the stages in demand estimation and forecasting?
- Identify the Market/Product 2. Collect the Data 3. Select Methods 4. Implement Methods 5. Evaluate Methods 6. Use Forecast and Validate
What are some factors to consider in demand estimation?
Time frame, Level of demand forecasting, General or Product specific forecast, Types of products, Product or market-specific factors
What are the types of forecasting methods?
Qualitative Methods and Quantitative Methods
Name one type of qualitative forecasting method.
Write
Why do consumers prefer new goods even at high prices?
Consumers prefer new goods even at high prices.
What is the Delphi method in demand forecasting?
The Delphi method involves a consensus among a group of experts who remain anonymous, sharing data and opinions until a consensus is reached.
What are the two main approaches in demand estimation?
The two main approaches in demand estimation are Executive Opinion and Market Research.
What do Time Series Models consider in demand forecasting?
Time Series Models consider past patterns of demand to predict future demand.
What do Casual Models assume in demand forecasting?
Casual Models assume that the forecast variable is related to other variables.
What is the Trend Projection Linear Trend equation used in Time Series models?
In the Trend Projection Linear Trend equation Y=a+bX, Y represents demand, X is the time period, a is the intercept, and b is the slope coefficient.
How does the Market Research stage in demand estimation differ from the Delphi method?
Market Research involves systematic methods like surveys and questionnaires to determine consumer preferences, while the Delphi method gathers expert opinions anonymously.
What is demand analysis and why is it important in economic analysis?
Demand analysis is the study of consumer behavior in terms of how much of a product or service they are willing to buy at different price levels. It is important in economic analysis to understand market dynamics and make informed managerial decisions.
How does the equilibrium position relate to demand and supply?
When demand and supply are equal, the country's economic conditions are in an equilibrium position.
What role do market forces play in a country's economic conditions?
Market forces, such as demand and supply, provide dynamism to the country's economic conditions.
What are the types of demand based on consumer behavior?
The types of demand include direct demand, indirect demand, derived demand, autonomous demand, durable goods demand, and non-durable goods demand.
Can you provide an example of autonomous demand?
Mobiles are an example of autonomous demand, where the demand for the product is not affected by the demand for any other product or service.
What distinguishes durable goods demand from non-durable goods demand?
Durable goods are used more than once and provide utility over time, while non-durable goods are single-use items consumed immediately.
Study Notes
Types of Goods
- Consumers prefer new goods even at high prices (CD)
- Seasonal goods: products with quantity and price fluctuations over time (e.g., ice-cream)
- Goods in short supply: limited availability, difficult to obtain (e.g., antiques)
Demand Forecasting
- Definition: estimation of a future situation or event under given conditions
- Tool for decision-making
- Purpose:
- Predict future demand and assess its effect on operations
- Reduce uncertainty, plan production, allocate resources, and formulate marketing strategies
Stages of Demand Estimation and Forecasting
- Identify the market/product
- Collect data
- Select methods
- Implement methods
- Evaluate methods
- Use forecast and validate
Factors to Consider in Demand Estimation
- Time frame: short-term, medium-term, or long-term
- Level of demand forecasting: macro-level, industry-level, or firm-level
- General or product-specific forecast
- Types of products: producer goods, consumer goods, services
- Product or market-specific factors: competition, market conditions, consumer psychology
Types of Forecasting Methods
- A. Qualitative Methods:
- Executive Opinion: collective forecast by managers/executives
- Market Research: systematic method involving questionnaires, surveys, sampling, and information analysis
- Delphi Method: consensus-based forecast involving experts
- B. Quantitative Methods:
- Time Series Models: predicting future demand based on past patterns
- Casual Models: assuming relationships between variables to predict demand
Time Series/Trend Projection
- Linear Trend: Y = a + bX, where Y is demand, X is time period, a is intercept, and b is slope coefficient
Demand Analysis
- Important part of economic analysis
- Manufacturers produce and supply goods to meet demand
- Demand and supply forces give dynamism to the country's economic conditions
- Types of demand:
- Direct demand: goods/services satisfying individual wants directly (e.g., fabric)
- Indirect demand: goods/services needed for manufacturing and satisfying consumers indirectly (e.g., cotton)
- Derived demand: desire for products/services determined by other activities (e.g., petrol for cars)
- Autonomous demand: demand for a product/service not affected by other products/services (e.g., mobiles)
- Durable goods demand: used more than once, providing a stream of services over time (e.g., TV)
- Non-durable goods demand: single use, consumed immediately (e.g., band-aid)
Explore different methods for demand forecasting in business, such as Executive Opinion, Market Research, and the Delphi Method. Learn how managers can collectively develop forecasts, utilize market research techniques, and obtain expert opinions anonymously to predict demand.
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