Answer 1

Introduction:
Demand forecasting plays a major role in the success of an organization. Demand forecasting
helps to figure out the probable demand of the good in the coming future. Demand forecasting
will estimate the amount of raw materials, management of cash flows, and decide the price of the
good. Demand forecasting is important as it will determine the amount of effort that are to be put
into the business for it to grow. Forecasting can be done in two different time perspectives;
namely, long term and short-term. Short-term forecasting will look into matters at a smaller time
interval and its effect on the goods. Long-term demand forecasting focuses on larger time duration
which will have effect on the expansion of the organization at long run due to high demand.
In order to achieve the best possible result in demand forecasting, an organization shall follow a
systemic approach. The steps involved in demand forecasting are as follows:

1. Determining the goal

First, we must identify the main objective for demand forecasting. It is to be figured out, weather
the demand is needed for short term or long term, weather the demand is focused particular for a
part of the organization or the whole organization. Also the of demand is to be identified, is it for
the whole market, or a segment or market.
2. Choosing the time perspective
The organization needs to decide the time duration for the forecasting depending on the objective.
Short term demand forecasting refers to forecasting up to 1 year. And long term refers to beyond
10 years. For long-term forecasting, one must remember the changes that would occur in the
market and economy over the period.
3. Selecting method for forecasting
There are various methods that can be followed for demand forecasting. The cost appropriate
method should be selected depending on the type of forecasting. The method selection also relies
on the availability of data, time period and the objective of the forecasting.
4. Data collection and analysis
The forecasting data can be gathered from primary and secondary sources. The type of data needed
would depend on the method selected for forecasting.
5. Interpretation of the analysis
The data analysis must be interpreted and accordingly the demand for the upcoming years must
be calculated. The end result is in the form of an equation which needs to be summed up in a
presentable format.
Conclusion:
Although demand forecasting has a vast array of operations in an organization, it does have some
limits. This is because demand forecasting is grounded upon a review of current and former events
to determine the best course of action for the future. Past occasions or incidents may not always
be reliable and acceptable for future base forecasts. The performance of demand forecasting is
determined by the system employed to anticipate demand. The criteria for opting a demand
forecasting technique include perfection, punctuality, affordability, ease of interpretation,
inflexibility, simplicity of use, and operation, among others.

Answer 2
Introduction:
Among the numerous ways in which businesses spend money are the acquisition of raw materials,
the payment of wages to employees, the purchase or rental of equipment, and other activities
associated with the production of services and goods. The company incurs these costs in order to
produce its products and services. The total amount of resources required to produce goods and
provide services is the cost. The cash values of all the inputs are added together and multiplied by
each input's individual cost to arrive at the cost of production.
Fixed costs are costs incurred by the company that do not change when production volume
changes. Even if the company produces nothing, the costs incurred remain. For example,
depreciation, maintenance costs, land and building rents, tax payments, etc., various costs remain
even when the company's profits increase or decrease. A company's earnings directly correlate
with its variable costs. Simply put, changes in production volume or level alter variable costs.
Calculation of Various Costs
The actual cost to a business of achieving a certain result is the total cost. Total short-term costs
are made up of two key components:
TFc (Total Fixed Cost): Total fixed cost is the cost exists weather production occurs or not. Total
fixed cost is represented as a line parallel to the x-axis.
TVc (Total Variable Cost): Total variable cost is the cost that depends on the production. It only
occurs if the production occurs.
The SRTC is calculated as the total of the fixed and variable costs.
By dividing the entire cost by the total number of systems the company has manufactured, the
average cost is determined. The running average cost of a company is an indicator of the costs
incurred during the production process.
SRAC is calculated by dividing the outcome by the total short-term cost.
To determine the average cost, divide the total cost by the number of systems produced by the
company. A company's running average cost is a representation of the costs incurred during the
various stages of production.
By dividing the result by the overall short-term cost, SRAC is computed.
The SRAC of a firm is U-shaped. It begins to decline, reaches a minimum, and then begins to
improve. Initial allocated expenses do not change; only variable costs, such as the price of
essential materials and labour, do. After that, regular expenses start to drop as manufacturing costs
for repairs are divided among it. When a business utilizes all of its resources, the typical cost is
minimized. Typical costs are minimized when the firm utilizes all of its resources. The short-run
average cost of producing a given amount of output is represented by the SRAC curve. A
downward slope of the SRAC curve indicates that normal costs will increase as a result. At
production levels above Q1, the SRAC curve begins to slope upward, indicating that typical costs
are increasing.
Marginal cost (MC) is the change in a company's total cost divided by its total income adjustment.
The minimum short-term cost is the change in total short-term costs brought about by the change
in the company's earnings. In the diagram, the base run cost is the slant of the complete run cost,
communicating the rate change in all out cost as an adjustment of result. A firm's marginal cost
determines whether it should produce more units. Assume that a firm can supply an additional
unit at a price lower than the cost of producing an additional unit (marginal cost). In this case, the
company may choose to manufacture an additional device.
Initial increasing and decreasing returns form the U-shaped short-run special cost (SRMC), short-
run average cost (SRAC), and typical variable cost (AVC). The SRMC curve intersects the SRAC
curve at the bottom of the AVC curve.

Quantity Total Total Total Average Average Average Marginal

Fixed Variable Cost Fixed Variable Total Cost
Cost Cost Cost Cost Cost
0 100 0 100 20
1 100 20 120 100 20 120 10
2 100 30 130 50 15 65 10
3 100 40 140 33.33 13.333 46.666 10
4 100 50 150 25 12.5 37.5 10
5 100 60 160 20 12 32 10
Conclusion:
When a company decides to produce a good, it must pay the costs of the various necessary inputs.
In addition to the rent of the production center, the company needs labor, raw materials, gas,
electricity and other necessary things. The financial value of inputs relative to returns is evaluated
in business decision making. The appropriate prices are multiplied by the inputs to arrive at the
cash value of those inputs (cost of production). Cost analysis is crucial for corporate decision-
making because the word "cost" can be interpreted in many different ways and has many
connotations depending on the situation. A corporation needs to have a thorough awareness of the
various cost ideas in order to allocate resources efficiently.

Answer 3A:
An Overview:
Even if the price of the product stays the same, demand for the product will rise if the consumer's
income rises. The responsiveness of demanders to consumer incomes is referred to as "income
elasticity of demand. "Watson refers to the "revenue flexibility of demand" as the ratio of the
adjustment rate of demand to the adjustment rate of income. "Demand elasticity," according to
Richard G. Lipsey, is the degree to which changes in demand respond to changes in earnings.
Demand equals income
Ey = percentage change in income/change in quantity demanded Percentage change in quantity
demanded equals new quantity demanded - Previous demand (Q) / Previous quantity demanded
(Q)
Percentage change in income equal to new income minus initial income ( Y)/initial income (Y).
Ey = Y/Q Q/Y
When the formula is used in this situation,
Q = 60 - 40 = 20
∆Y = 25,000 – 20,000 = 5,000
Q = 40
Ey = 2
The income elasticity of demand is affected by both the product and the environment. The three
categories below represent the demand's revenue flexibility based on a numerical value:
• Flexibility of sales demand is considered good if consumer demand increases with the
proportional change of sales and vice versa. There are three types of positive feedback elasticity
of demand:
Uniform elasticity, less than uniform elasticity, and greater income elasticity.
• Consistent demand-revenue elasticity: If a proportional rise in customer income causes a relative
change (increase) in product demand, this elasticity is considered uniform.
• Elasticity of demand is less than unit income: If the income elasticity of demand is less than 1,
a proportional adjustment of the customer's income leads to a modest increase in the demand for
the good.
• More flexible demand than a unitary income: When the earnings flexibility of demand is greater
than 1, a proportional change in a customer's revenue results in an equally significant increase in
demand for a good.
• If consumer demand for goods declines along with a proportionate fall in income, or vice versa,
the income elasticity of demand is reversed. When things are subpar, this often occurs.
Conclusion:
Sellers benefit from demand yield flexibility when making investment decisions. By and large,
dealers like to put resources into business sectors where item request is more delicate to changes
in net revenues or where the pay flexibility of interest is more prominent than nothing.

Answer 3B:
Introduction:
The price elasticity of demand measures the change in the quantity demanded of a product due to
a change in its market value. In other words, it is the change in price divided by the percentage
change in quantity demanded. You can quantify it like this:
Price Elasticity of Demand is equal to the ratio of changes in quantity demanded and prices.
The price and demand change frequency are represented by the symbol.
The equation for calculating the price elasticity of demand is as a result
Ep = ΔQ/ΔP × P/Q
Where,
Ep = price elasticity of demand
P = initial price
ΔP = price change
Q = original quantity demanded
ΔQ = change in quantity demanded
in this case Applying the formula
ΔQ = 25000 – 20000 = 5000
ΔP = 500 – 400 = 100
P = 500
Q = 20,000
Ep = 1.25

Demand does not always respond in the same way to changes in value in all cases.A product's
demand can be either inelastic or elastic depending on the desired price of change in relation to
the price change. The price elasticity of demand is divided into five major teams according to the
rate of adjustment:

• When the desired quantity varies dramatically as a response of a little price shift, there is perfect
elastic demand (increase or fall). Demand decreases to zero with a minor price rise while demand
increases endlessly with a small price decrease. The demand in this situation is flexible, or e= ∞.

• Demand that is perfectly elastic: When a product's price changes without changing the quantity
needed, it is said to be perfectly inelastic. The elasticity of demand is zero in these circumstances,
as indicated by ep = 0.

• Sufficiently elastic demand: Demand is considered more elastic if a relative or percentage change
in price causes a greater relative or percentage change (increase or decrease) in quantity
demanded. However, popularity outweighs price changes. As a result, the elasticity of demand in
this case is greater than one, as evidenced by ep > 1.

• Relatively inelastic demand: Demand is relatively inelastic if the percentage or rate of change in
price is less than the percentage or adjusted rate of demand. The elasticity of demand is less than
1. Simply put, the population adjustment is smaller than the price adjustment.

• Equal Demand for Elasticity: When demand changes in response to a price change (increase or
decrease), this phenomenon is known as uniform elastic demand. The mathematical value of the
uniform elastic requirement is 1.
Conclusion:
Therefore, measuring the price elasticity of demand is crucial.