_demand forecasting_SS1234567892011.pptx

Basic Demand Forecasting

1. 3 rd year B.Com Honours Business Economics and Quantitative Technique Paper 3CH1 Sandeep Sundas (7063082473) ASSISTANT PROFESSOR IN ECONOMICS Kaliyaganj College

2. Demand Forecasting It is a technique for estimation the probable demand for a product or services in the future. It is a technique of estimating the present demand on the basis of past demand for a product or service. It is a scientific and statistical method in estimating the future demand.

3. Uses It is useful for economic planning. It is useful in meeting efficient decision. Usefulness in accounting. Formulate a pricing policy. Preparations of budget.

4. Objectives of demand forecasting To get rid of business fluctuations. To get rid of over demand or over supply. To understand the necessity of a good for different consumers. Forecast sales and revenue. It analyze the market influences on different products. To match the competitive strength of business unit. Planning for inventory control.

5. Factors affecting demand forecasting Purchasing power of customers Demography Price Replacement demand Socio-economic conditions Conditions within the industry.

6. Methods of demand forecasting Census and Sample survey method: Census survey or complete enumeration method is the method of collecting information from each and every individual of a population under review. Sample survey method: Sample survey method is the method of randomly selecting a sample from the population under review.

7. Census and sample survey Sl. No Census Survey Sample Survey 1 It deals with the entire observation of a population under review. It deals with a sample of observations from the population under review. 2 It presents the accurate information. The information collected are approximately accurate. 3 It is a time consuming method. It requires less time. 4 It is very costly. The method is economical. 5 No error. There may be sampling error. 6 The results are reliable and accurate. Less reliable and accurate. 7 Appropriate for population of heterogeneous nature. Appropriate for population of homogenous nature.

8. Trend method It is a time series method. We start with the linear equation y= a+bx under the least square conditions ∑y= na+b∑x and ∑ xy =a∑x+b∑x 2 For example Suppose the year and sales of certain firm is given 1990, 1991, 1992, 1993, 1994, 1995, 1996 and you are required to predict the sales for 1998.

9. You are required to construct the following Y is the sales that will be given in the question. Construct x( in order to construct x, if the number of observations are odd then we assign 0 to the middlemost year and increase x by 1 to the succeeding years and decrease x by 1 to the preceding years). After constructing x you are supposed to find the summation of ∑ xy , ∑ x 2, ∑ x and ∑ y. With two least square conditions find the value of a and b. Put the value of a and b in the equation y= a+bx . Now for 1998 what would be the value of x? Put that value of x and you will get y. This is the required predicted value.

10. Regression Method Under the regression method we can find the regression equation of x on y and that of y on x. The values for two variables x and y will be given and you are supposed to construct ∑x, ∑y, ∑x2, ∑y2 and ∑ xy . Suppose that x is a rainfall and y is production/yield. One variable depending on the other. We can find the value of y when x is given and vice versa. This way we can predict the value using regression method.

11. Regression and correlation formula

12. Thank You. Sandeep Sundas (7063082473) ASSISTANT PROFESSOR IN ECONOMICS Kaliyaganj College