4 Demand - Analysis & Forecasting
4 Demand - Analysis & Forecasting
4 Demand - Analysis & Forecasting
Concept
Price plays an important role in determining the demand of a commodity apart from other factors (like income, tastes & preferences, habits, fashion, etc). The analysis of demand tries to identify how demand changes due to effect of price & also due to other factors. The two ways to identify the demand are: 1. Extension & Contraction of Demand 2. Increase & Decrease of Demand
Increase of demand implies that at any given price a larger quantity is demanded because of its utility to the consumer. Decrease of demand implies that at any given price a lesser quantity is demanded because of not being preferred by the consumer.
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Demand Forecasting
Demand results in sales of the produced products which constitute the main source of revenue to business. Thus production & sales planning requires forecast of the market conditions & their relationship to demand. Though the forecasting of demand may not be exact at all times, but it gives an rough idea of the demand for the product in the future.
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It helps in deciding suitable prices of the product for its marketing & advertising. e.g. meeting demand of TV sets during world cup season.
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e.g. 1. LIC taking decision of not accepting out station cheques at the time of policy forging. 2. Fiat taking decision of distributing it cars through the distribution channel of Tata motors.
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Methods of Demand Forecasting Survey method 1.Opinion survey method 2.Consumers interview
Statistical method
1.Trend projection
2.Economic indicators
3.Correlation & Regression
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