MANAGERIAL ECONOMICS

Demand Forecasting

Biplab Sarkar
Department of Management Studies
MANAGERIAL ECONOMICS

Demand Forecasting

Biplab Sarkar
Department of Management Studies
MANAGERIAL ECONOMICS
Demand Forecasting

• Firm needs to plan for the right volume of output,

appropriate price for its products, and also the future
expansion of its business; and all this in the backdrop of
uncertainty.

• Forecasting is a method which helps in reducing the

uncertainty factor by planning the future systematically
and diligently

• Demand forecasting helps a firm to determine optimum

level of output, future cost and production functions, and
successfully control its inventory.
MANAGERIAL ECONOMICS
Meaning of Demand Forecasting

• Demand forecasting is the scientific and analytical

estimation of demand for a product (good or service) for a
particular period of time.

• It involves estimation of the level of demand; extent and

magnitude of demand; responsiveness of demand
(elasticity) to a proposed change in price, income of
consumer, price of other goods (complements or
substitutes) and other determinants.
MANAGERIAL ECONOMICS
Categorization of Demand Forecasting

By level of forecasting – firm, industry, and

1 economy.

By time period – short-term and long-term

2 forecasting.

By nature of goods – consumer goods and

3 capital goods.
MANAGERIAL ECONOMICS
Techniques of Demand Forecasting

SUBJECTIVE QUANTITATIVE
TECHNIQUES TECHNIQUES
MANAGERIAL ECONOMICS
Subjective Methods of Demand Forecasting

Consumer’s Opinion Survey

Subjective Methods of
Demand Forecasting

Salesforce Composite Method

Experts Opinion Method

Market Simulation

Test Marketing
MANAGERIAL ECONOMICS
Quantitative Methods of Demand Forecasting

Trend Projection
Quantitative Methods of
Demand Forecasting

Smoothing Techniques

Barometric Techniques

Econometric Methods
MANAGERIAL ECONOMICS
Choice of a Specific Forecasting Techniques

✓ Objective: imminent objective of forecast, whether it is for a new

product, or to gauge impact of a new advertisement, etc.

✓ Cost involved: cost of forecasting should not be more than its benefit,
here opportunity cost of resources will also be important.

✓ Time perspective: whether the forecast is meant for the short run or
the long run.
✓ Complexity of the technique: availability of expertise; this would
determine whether the firm would look for experts “in house” or
outsource it.

✓ Nature and quality of available data.

THANK YOU

Biplab Sarkar
Department of Management Studies
biplabsarkar@pes.edu
+91 80 6666 3333 Extn 337