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Presented By :
Hidayat ullah
Sardar ahmad khan
Jamshaid
Amir rahman
Mukhtiar ahmad
Mustaqeem khan
managerial economics
MBA (022), section (A)
Demand
Demand means desire to buy something and
ability to pay for it.
Elasticity of demand
9 150
Inelastic demand
A large change in
price has a small Price Demand
effect on quantity
demanded. 10 100
5 110
Sardar ahmad khan
MBA(022)A
MEASUREMENT OF
ELASTICITY
MEASUREMENT OF ELASTICITY
Total expenditure method
MEASUREMENT OF
ELASTICITY
Income elasticity
Def: “income elasticity of demand is the
rate of responsiveness of demand to
changes in the income of the
consumer.”
It is calculated as the ratio of the percent
change in demand to the percent change in
income.
= %change in Qd
%change in consumer income
ie. If, in response to a 10%increase in income,
the demand of a good increased by 20%, the
income elasticity of demand would be
20%/10%=2%
Inferior good's demand falls as consumer
income increases.
Negative income elasticity
Positive income elasticity
Zero income elasticity
Cross elasticity
def: the rate of responsiveness of Qd of
commodity A to changes in price of
commodity B.
CE =AB QA PB
PB QA
SUBTITUTE GOODS
PA QdB +
COMPLEMENT GOODS
PA QdB _
Amir rahman
MBA(022)A
Demand forecasting
Demand Forecasting
Qualitative techniques
Quantitative techniques
Qualitative techniques
Qualitative forecasting techniques are
generally more subjective than their
quantitative counterparts. Qualitative
techniques are more useful in the
earlier stages of the product life cycle,
when less past data exists for use in
quantitative methods.
Qualitative methods include
Surveys techniques,
Opinion polls
Survey techniques
The survey is a non-experimental,
descriptive research method. Surveys
can be useful when a researcher wants
to collect data on phenomena that
cannot be directly observed (such as,
consumer’s decisions to purchase
houses, automobiles, TV sets etc.)
Surveys are used to forecast
consumer demand in general and the
level of consumer confidence in the
economy.
Opinion polls
The opinion
polls are used
by firms to
forecast its own
sales by polling
experts within
and outside the
firm.
Several polling techniques
Executive polling
Smoothing techniques
Smoothing techniques
These predict values of a time series on the
bases of some average of its past values.
Smoothing techniques are useful when the time
series has irregular or random variation
:There are tow types of ST
Moving averages
Exponential smoothing
Moving averages
The simplest smoothing techniques is
moving averages. Here the forecasted
value of a time series in a given period
(month, year. Etc) is equal to the
average value of the time series in a
number of previous periods.
Three quarter & five quarter MV
Market share 3 quarter MV A-F (A-F)2 5 quarter MV A-F (A-F)2
(A) (F) (F)
1 20 - - - - - -
2 22 - - - - - -
3 23 - - - - - -
4 24 21.67 2.33 5.43 - - -
5 18 23 -5 25 - - -
6 23 21.67 1,33 1.77 21.4 1.6 2.56
7 19 21.67 -2.67 7.13 22 -3 9
8 17 20 -3 9 21.4 -4.4 19.36
9 22 19.67 2.33 5.43 20.2 1.8 3.24
10 23 19.33 3.67 13.47 19.8 3.2 10.24
11 18 20.67 -2.67 7.13 20.8 -2.8 7.84
12 23 21 2 4 19.8 3.2 10.24
Total 78.35 Toital 62.48
13 - 21.33 20.6
Which quarter is best
Following formula will give answer
RMSE (root mean square error)
RMSE = √ ∑(A-F)2 ÷n
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