MBA606- Economics for Management

Demand Forecasting for Polyester Filament Yarn

Submitted by:

Ganga Reddy (12125022)

Ravi Kalluri (12125025)
Pawan Srivatsawa (12125033)

Product: Polyester Filament Yarn

Geography:India
Period for which analysis was done: 1997-2011 (15 years Annual Data)
Objective of the study:
To understand trend of the demand for the Polyester Filament Yarn forecast the demand of it
in India based on different factors. The demand for Polyester Filament Yarn in India
determined by some key factors such as Price of Polyester Filament Yarn( Poly/viscose
(70x30) 2/15s) (Px), Price of substitute Nylon Filament Yarn(44 d/40 d)(Py), Per Capita
Income (I), and the total population (N). The report aims at analyzing the role of these
factors in determining and forecasting the demand for Polyester Filament Yarn. Multiple
Regression Analysis model was used to estimate demand projections on basis of the past data
available for the dependent variables Px, Py, I, and N.
Estimation method:
Multiple regression model is used for demand forecasting, since demand for the Polyester
Filament Yarn depends on multiple factors. The equation for the regression model can be
represented as:
Q = a + b*I + c*Px +d*Py+ e*N + E
Where Q is the estimated demand
a represents the constant / intercept
b is the Income coefficient (I),
c is the Price coefficient (Px) for Viscose Fibre
d is the Price coefficient (Py) for the substitute Nylon Filament Yarn
e is the Total population coefficient (N)
E represents the standard error during estimation

The various coefficients in the Demand (Q) equation are determined using the multiple
regression method. The resultant equation forms the basis of the demand forecasting for
Viscose Fibre.
Data used for the Analysis:

Year and
Month

Polyester
Filament Yarn
Consumption

Nylon Filament
Yarn
Consumption

Prices of
Poly/viscose
(70x30) 2/15s

Prices of 44
d/40 d:
Mumbai

Population
(millions)

Per
Capita
income
(Rs)

Dec-97
Dec-98
Dec-99
Dec-00
Dec-01

473676.6
15906.33
737816.32
829889.07
781453.4

39239.68
29931.12
28228.31
26260.27
23648.84

84.4
86.32
80.89
90.67
96.37

138.32
145.56
155.82
163.38
181.56

962.378
979.673
997.515
1014.01
1028.61

12707
14396
15070
15839
16648

Dec-02
Dec-03
Dec-04
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Dec-10
Dec-11

874962.47
1005478.31
1054882.97
1040787.57
1075408.05
1170223.48
1291742.9
1247429.86
1246973.91
1093860.59

27201.33
27111.75
22831.9
30342.93
33199.79
30817.44
28470.87
29505.86
28583.22
31028.61

90.38
103.07
102.86
108
107.3
107.5
105.05
104.2
113.09
146.56

171.82
169.97
159.55
186.6
197.97
201.02
198.9
210.77
225.85
238.72

1045.54
1062.39
1079.12
1095.72
1112.19
1128.52
1144.73
1160.81
1176.74
1192.51

17800
18899
20936
22946
25956
29382
33283
37490
46492
56845

Source of Data:
Industry Analysis Service (IAS) Database for Commodity details.
http://rbidocs.rbi.org.in/
http://www.censusindia.gov.in

Data Description:
The data used for demand forecasting corresponds is from the year 1997 to 2011. Following are
some key points regarding the data used for demand forecasting.

Price of Polyester Filament Yarn (Px): Price of Polyester Filament Yarn is used for
determining its demand The data represents the price of Polyester Filament Yarn in
India from 1997 to 2011 in Rs.

Price of Nylon Filament Yarn(Py): Price of substitute Nylon Filament Yarn is also a key
factor for determining Polyester Filament Yarns demand The data represents the price
of Nylon Filament Yarn in India from 1997 to 2011 in Rs.

Per Capita Income (I): Indias Polyester Filament Yarn demand is also affected by the
Per Capita Income Factor. The demand of Polyester Filament Yarn decreases with the
increase in I factor. The data represents per capita Income from 1997to 2011 in Rs.

Demand (Q): The data in the table represents the demand of Polyester Filament Yarn in
India from 1997to 2011. This forms the basis of regression Analysis estimating Polyester

Filament Yarn demand.

Population (N): Polyester Filament Yarn demand is directly dependent on the no of

consumers in the market that can possibly use the product. The data given above
represents the population of India from 1997 to 2011 in millions.

Polyester Filament Yarn Consumption vs Price of Prices of 44 d/40 d (Nylon

Filament Yarn) Line Fit Plot

Polyester Filament Yarn Consumption

vs Prices of 44 d/40 d: Mumbai
300
250
200

Prices of 44 d/40 d:
Mumbai

150

Linear (Prices of 44
d/40 d: Mumbai)

100
50
0
0

500000

1000000

1500000

Regression results based on this single factor

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.748896602
R Square
0.560846121
Adjusted R Square
0.527065053
Standard Error 231554.4174
Observations
15
ANOVA
df
Regression
Residual
Total

1
13
14

SS
MS
F
Significance F
8.90177E+11 8.902E+11 16.60238 0.00131426
6.97027E+11 5.362E+10
1.5872E+12

Coefficients Standard Error

t Stat
P-value Lower 95% Upper 95%Lower 95.0%
Upper 95.0%
Intercept
-654192.2806
393213.0833 -1.663709 0.120076 -1503677.5 195292.9 -1503677 195292.9
Prices of 44 d/408650.771917
d: Mumbai
2123.096269 4.0746018 0.001314 4064.10129 13237.44 4064.1013 13237.44

Polyester Filament Yarn Consumption vs Its Price Line Fit Plot

Prices of Poly/viscose (70x30) 2/15s

160
140
120
Prices of Poly/viscose
(70x30) 2/15s

100
80

Linear (Prices of
Poly/viscose (70x30)
2/15s)

60
40
20
0
0

500000

1000000

1500000

Regression results based on this single factor

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.597050914
R Square
0.356469794
Adjusted R Square
0.306967471
Standard Error
280303.9237
Observations
15
ANOVA
df
Regression
Residual
Total

Intercept
X Variable 1

SS
MS
F Significance F
1 5.66E+11 5.66E+11 7.201072 0.018776
13 1.02E+12 7.86E+10
14 1.59E+12

Coefficients Standard Error t Stat

P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
-361983.9062 486633.9 -0.74385 0.470198 -1413293 689324.7 -1413293 689324.7
12687.99236 4728.184 2.683481 0.018776 2473.373 22902.61 2473.373 22902.61

Polyester Filament Yarn Consumption vs Population Line Fit Plot

Population (millions)
1400
1200
1000
Population (millions)

800
600

Linear (Population
(millions))

400
200
0
0

500000

1000000

1500000

Regression results based on this single factor

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.843724677
R Square
0.711871331
Adjusted R Square 0.689707587
Standard Error
187559.0159
Observations
15
ANOVA
df
Regression
Residual
Total

1
13
14

SS
MS
F Significance F
1.12989E+12 1.13E+12 32.11873 7.7E-05
4.57319E+11 3.52E+10
1.5872E+12

Coefficients Standard Error t Stat

P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept
-3242268.715
737674.8428 -4.39525 0.000724 -4835918 -1648619 -4835918 -1648619
Population (millions)3867.290424
682.3820538 5.667339 7.7E-05 2393.094 5341.487 2393.094 5341.487

Polyester Filament Yarn Consumption vs Per Capita Income Line Fit Plot

Per Capita income (Rs)

60000
50000
40000
Per Capita income (Rs)
30000
Linear (Per Capita
income (Rs))

20000
10000
0
0

500000

1000000

1500000

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.63596836
R Square
0.40445576
Adjusted R Square 0.35864466
Standard Error
269650.807
Observations
15
ANOVA
df
Regression
Residual
Total

SS
MS
F Significance F
1 6.42E+11 6.42E+11 8.828773 0.010819
13 9.45E+11 7.27E+10
14 1.59E+12

Coefficients
Standard Error t Stat
P-value Lower 95%Upper 95%Lower 95.0%
Upper 95.0%
Intercept
504598.589 159008.6 3.173404 0.007334 161081.4 848115.8 161081.4 848115.8
Per Capita income (Rs)
16.5627637 5.574201 2.971325 0.010819 4.520434 28.60509 4.520434 28.60509

Over All Regression

SUMMARY OUTPUT
Regression Statistics
Multiple R
0.909073163
R Square
0.826414015
Adjusted R Square 0.756979621
Standard Error
165986.8618
Observations
15
ANOVA
df

SS
4 1.31169E+12
10 2.75516E+11
14 1.5872E+12

MS
3.27922E+11
27551638301

F
Significance F
11.90208436
0.000808846

Coefficients Standard Error

Intercept
-6229933.776 1500141.031
Prices of Poly/viscose
-2516.950696
(70x30) 2/15s6206.938613
Prices of 44 d/40 d: Mumbai
1191.45208 5509.955269
Population (millions)
7156.616768 1944.448126
Per Capita income (Rs)
-20.37177393 11.0478608

t Stat
-4.152898727
-0.405505975
0.216236253
3.680538799
-1.843956428

P-value
0.001970897
0.693645483
0.833150817
0.004242602
0.094981168

Regression
Residual
Total

Lower 95%
-9572456.276
-16346.87171
-11085.49327
2824.116373
-44.9879417

Upper 95%
-2887411.277
11312.97032
13468.39743
11489.11716
4.24439384

Lower 95.0%
-9572456.276
-16346.87171
-11085.49327
2824.116373
-44.9879417

Upper 95.0%
-2887411.277
11312.97032
13468.39743
11489.11716
4.24439384

Interpretation:
From the Regression Analysis we get the following equation for determining the demand of
Polyester Filament Yarn:
Q = -6229933.776+ (-) 20.37177393*I+(-)2516.950696*Px+ 1191.45208*Py+ 7156.616768*N+
165986.8618

Positive value of Coefficient for Population shows that the demand for Polyester Filament Yarn
increases with increase in population.
Negative value of the coefficient of Per Capita Income and coefficient of Price for Polyester
Filament Yarn shows that the increase in price has a negative effect on the demand of Polyester
Filament Yarn.
Positive value of the coefficient of Price for Nylon Filament Yarn shows that the increase in price
has a positive effect on the demand of Polyester Filament Yarn.
The R square value is 0.8264 which signifies the following factors give a reasonable equation for
the demand forecasting of the Polyester Filament Yarn.

The above equation shows how each factor influences and in what proportions the demand for the
Polyester Filament Yarn.