Demand Equation

We formulated a demand equation for the passenger vehicle segment of the automobile industry in India. In our training set, we
considered quarterly data from September 2012 to March 2020. (59 data points in total)
Assumptions
1. Demand curve is linear
2. Effect of time value of money is negligible
3. Railway is assumed to be a close substitute for passenger vehicles
4. Price is assumed to be net realizable value per car sold (i.e. Total quarterly turnover/number of passenger vehicle sold)
5. Fuel price is assumed to be a close compliment for passenger vehicles
Summary statistics of the variables used
A descriptive analysis and the corresponding used notations are tabulated below:
Table 1: Descriptive analysis of Variables used in the Demand curve
Using the variables mentioned above, a demand regression equation was obtained. The corresponding coefficients, standard
error, Test statistics value, and P-value are tabulated below. The rationale behind the positive/negative sign of coefficients for
each variable is explained in the graphs later.
Table 2 : Demand regression Statistics
For the regression model, R square value is 0.85 which signifies that 85% proportion of the variance of demand is explained by
6 independent variables. The F significance value was in the range of e^-20, which signifies a good fit.
Q = -3370311 -1.33*P + 0.21*G + 3571.99*N -6858.96*FX – 2846.92*F + 551.01*R
To visualize and analyze how the actual data correlate with those predicted by the model, we plotted the predicted vs actual
demand curve.