Business Economics
1. Demand forecasting in an organization plays a vital role in business organizations. It provides reasonable data for the organization’s capital investment and expansion decisions. Keeping the above statement into consideration. Discuss the various steps involved in demand forecasting (10 Marks)
Introduction:
“Demand estimating (forecasting) may be characterized as a method of determining values for demand in future periods,” creates Evan J. Douglas. Demand forecasting is estimating future demand for a firm’s products or services. It is referred to as sales forecasting since it includes anticipating an organization’s future sales figures. Demand forecasting helps a company make business choices such as intending the manufacturing process, obtaining raw materials, managing cash, and determining the pricing of its products. Organizations can anticipate demand either internally by
2. From the given hypnotically table Calculate Total Cost, Average Fixed Cost, Average Variable cost, and Marginal Cost. (10 Marks)
Quantity Total
Fixed
Cost Total
Variable
Cost Total
Cost Average
Fixed
Cost Average
Variable
Cost Average
Total
Cost Marginal
Cost
0 100 0
1 100 20
2 100 30
3 100 40
4 100 50
5 100 60
Introduction:
Organizations incur miscellaneous expenses on various activities for manufacturing services and products, such as acquiring basic materials, paying labor salaries/wages, and purchasing or leasing machines and buildings. These expenditures represent the company’s cost of generating its services and products. The quantity of sources required for manufacturing items and services is referred to as the cost. The sum of the cash values of the inputs multiplied by their specific costs is referred to as the cost of production.
3. a. Suppose the monthly income of individual increases from Rs 20,000 to Rs 25,000 which increase his demand for clothes from 40 units to 60 units. Calculate the income elasticity of demand. (5 Marks)
Introduction:
Even if the product’s price stays the same, an increase in consumer earnings increases demand for it. The term “earnings elasticity of demand” refers to the amount of demander’s responsiveness to consumer income. The proportion of the percentage adjustment in the amount demanded to the percentage adjustment in income is what Watson refers to as “revenue flexibility of demand.” Richard G. Lipsey claims that “earnings elasticity of demand” refers to how responsively demand
3. b. Assume that a business firm sells a product at the price of Rs 500. The firm has decided to reduce the price of the product to Rs 400. Consequently, the demand for the product is raised from 20,000 units to 25,000 units. Calculate the price elasticity of demand. (5 Marks)
Introduction:
Price elasticity of demand is a measure of the change in the quantity requested of a product due to a modification in the product’s market value. Simply put, it is the percentage modification in the required amount divided by the price modification. It can be specified numerically as:
Price elasticity of demand = Proportionate change in the quantity demanded/ Proportionate change in Price
