Business Economics Assignment Semester 1

BUSINESS ECONOMICS ASSIGNMENT SEMESTER -1
1. Demand and Supply are the most fundamental concepts of Business Economics. Demand is the
desire backed up by willingness to purchase and ability to pay for a specific product or service at a
specific time period.
Forecasting is the prediction or estimation of future events. Demand Forecasting is estimation of
future sales and demand of a product. Demand forecasting gives the answer to the questions such as
when, where, how and how much.
Demand Forecasting plays a vital role in decision making while capital investment and expansion. To
achieve accurate demand forecasting there are several steps which could be traced through the help of
the following points: -
a) Identification of Goal : -
Before starting the process of demand forecasting it is very important to understand the goal and
objective for the demand forecasting. The objective can be understood such as the time period for
which demand forecasting is to be done which means whether the demand forecasting is to be
done for long term or short term time period (for 1 year or more than a year), for individual or
market demand (for an organisation or market segment) , methods to be used for demand
forecasting, etc.
b) Determination of method of demand forecasting: -
There are various methods of demand forecasting depending upon factors such as objective, time
period, climatic conditions, availability of data, organisational conditions, nature of product, who
is going to forecast the demand, etc. Demand forecasting method also depends upon the strengths
and weaknesses of the economist or person performing demand forecasting. There are broadly
two methods of demand forecasting namely, Qualitative method and Quantitively method of
demand forecasting. There are many subtypes in these two methods and selection of these
methods depend upon several factors and few of such factors were mentioned above.
c) Planning and scheduling production:

Demand forecasting allows the organisation in order to provide the products that their customers
require, when they really need those products. Demand Forecasting needs that order fulfilment is
synced up with your marketing even prior to the launch of product.
d) Developing a pricing strategy:

Demand forecasting is not just regarding perfecting a business’s production cycle of supply and
demand, but it must also help in pricing of products based on the demand of their particular
product. Taking a proper understanding over the market as well as the potential opportunities,
businesses can develop as well, bring in competitive pricing, make and take the most appropriate
marketing strategies, and invest in the business development. Demand forecasting allows the
organisation to make more informed and effective decisions about any topics from managing the
inventory in order to achieve the and effectiveness in supply chain. As the customer expectations
have been totally changing rapidly than ever, businesses require a proper method and tactic to
forecast the demand accurately and precisely.
e) Collecting, analysing & Adjusting Data : -
After the step of selection of method, one must start the collection of relevant data. In order to
achieve this step, the below mentioned pointers can extend a helping hand : -
i) Identification of purpose of data collection

ii) Identification of effective method of data collection
iii) Identification of resources of data collection
iv) Identification of allocation of the resources for data collection
v) Planning the factors to be considered while collecting the data
vi) Timing for data collection
vii) Scope of data collection
viii) Understanding the reliability of data
ix) Analysing and interpretation of data
x) Usage of the collected data
c) Testing accuracy : -
It is very important to test the efficiency of the demand forecasting as this ensure the prediction of
the organisation on various aspects such as future sales, budget, allocation of resources, etc .
So, to conclude, above mentioned were the steps through which a firm or organisation must go
through in the process of demand forecasting. While taking expansion decisions as well as capital
investment, demand forecasting plays a vital role and it must be done by following the above
mentioned steps.
2.
Total Total
Fixed Variable Total Average Average Average Marginal
QTY Cost Cost Cost Fixed Cost Variable Cost Total Cost Cost
0 100 0 100 0 0 0 0
1 100 20 120 100 20 120 20
2 100 30 130 50 15 65 10
3 100 40 140 33.333 13.33 46.666 10
4 100 50 150 25 12.5 37.5 10
5 100 60 160 20 12 32 10
1. Total Cost = Total Fixed Cost + Total Variable Cost
100 + 0 = 100
100 + 20 = 120
100 + 30 = 130
100 + 40 = 140
100 + 50 = 150
100 + 60 = 160
2. Average Fixed Cost = Total Fixed Cost / Quantity
100 / 0 = 0
100 / 1 = 100
100 / 2 = 50
100 / 3 = 33.33
100 / 4 = 25
100 / 5 = 20
3. Average Variable cost = Total Variable Cost / Quantity
0/0=0
20 / 1 = 20
30 / 2 = 15
40 / 3 = 13.33
50 / 4 = 12.50
60 / 5 = 12
4. Average Total Cost = Total Cost / Quantity
100 / 0 = 0
120 / 1 = 120
130 / 2 = 65
140 / 3 = 46.6666
150 / 4 = 37.50
160 / 5 = 32
5. Marginal Cost = Total Cost – Previous Total Cost
120 – 100 = 20
130 – 120 = 10
140 – 130 = 10
150 – 140 = 10
160 – 150 = 10
3. a )
Old income ( Q1 ) = 20000

New income ( Q2 ) = 25000
Old demand ( Y1 ) = 40
New demand ( Y2 ) = 60
Formula : - Q 2 – Q1 / Q1
Y2 – Y1 / Y1
25000 - 20000 / 200000 = 0.5

60 - 40 / 40 = 0.25
0.5 / 0.25 = 2
Therefore , the income elasticity of demand is 2
3b)
Old price 500 old qty 20000
New price 400 new qty 25000
Difference in price = 100 (500-400)
= 20000
Difference in quantity 5000 (25000-20000)
= 5000 = 500
100 20000
= 2500000
2000000
=5
4
= 1.25

Business Economics Assignment Semester 1

Uploaded by

Copyright:

Available Formats

Business Economics Assignment Semester 1

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Business Economics Assignment Semester 1

Uploaded by

Copyright:

Available Formats

BUSINESS ECONOMICS ASSIGNMENT SEMESTER -1

b) Determination of method of demand forecasting: -

c) Planning and scheduling production:

d) Developing a pricing strategy:

i) Identification of purpose of data collection

1 100 20 120 100 20 120 20

3 100 40 140 33.333 13.33 46.666 10

4 100 50 150 25 12.5 37.5 10

1. Total Cost = Total Fixed Cost + Total Variable Cost

2. Average Fixed Cost = Total Fixed Cost / Quantity

3. Average Variable cost = Total Variable Cost / Quantity

5. Marginal Cost = Total Cost – Previous Total Cost

Old income ( Q1 ) = 20000

25000 - 20000 / 200000 = 0.5

Therefore , the income elasticity of demand is 2

Difference in price = 100 (500-400)

Difference in quantity 5000 (25000-20000)

You might also like