Demand Estimation : A Product Or Service

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Demand Estimation is a process that involves coming up with an estimate of the amount for a product or service. This demand is typically confined to a particular time period such as a month, quarter or year. According to Luke Arthur, “Demand Estimation not away to predict the future of any business, it can be used to come up with some fairly accurate estimates if the assumption are made correctly. One of the reason companies use demand estimation is pricing, when you offer a new product or start a new business you may not have an idea on how to price your product. Once you have an idea for the demand of your product, you will know how to price the product. In addition to pricing, production is another reason company’s use demand estimation. Before a company put a large amount of money into producing a product, it can estimate the demand for that product” (Arthur, 2013). It is important to remember that these estimates are only educated guesses as to the demand of a product or services Compute the plasticity’s for each independent variable. One of the most important tools that used by economists is demand estimations. It is very important and critical that any company understands the demand and pricing environment. Q= -2,000 – 100p + 15A +25PX + 10Y (5,234) (2.29) (525) (1.75) (1.5) R2 = 0.855 N = 120 F = 35.25 Your supervisor asked you to compute the plasticity’s for each independent variable. Assume the following values for the independent variables: Q = Quantity in demand of unit (Dependent variable) P = 200 Cents per unit PX = 300 Cents per unit A = 640 ordering expenditures per month Y = 5000 per capita income Using the above shown information, I will calculate the plasticity for each variable. First I will calcu... ... middle of paper ... ...ld impact the demand for, and the supply, of the product. Demand shift or curve of a product occurs when consumers change their perception or demand of a product. This shift can either be a positive or a negative, a shift to the right denotes the product is in high demand, and a large number will be sold at a given price. Conversely a shift to the left can be caused by multiple factors such as a change in price, the manufacture may raise the price to capitalize on the popularity of the product. A shift to the left maybe caused by a surplus of the product, or the manufacture may raise the price of the product, the consumer perception or taste of a product may also change. Any of these factors can affect the long or short term demand of a product References Arthur, L. (2013). What is Demand Analysis. Demand Media, 4.

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