Regression Method:

This is a very common method of forecasting demand. Under this

method a relationship is established between quantity demanded
(dependent variable) and independent variables such as income, price of
the good, prices of the related goods, etc. Once the relationship is
established, we derive regression equation assuming relationship to be
linear. The equation will be of the form Y = A+ BX. There could also be a
curvy linear relationship between dependent and independent variables.
Once the regression equation is derived the value of Y,i.e, quantity
demanded can be estimated for any given value of X.

Advantages of Regression Method

1) As the method is based on causal relationships, it produces reliable
and accurate results.
2) Besides generating the forecast, it also explains the economic
phenomenon.
3)It is neither as subjective as the qualitative techniques nor as
mechanistic as the quantitative ones
4) This method not only forecasts the direction but also the magnitude of
the change.
5) The method is quite consistent.

Disadvantages of Regression Method

1)The method uses complex calculations.
2) It is costly and time consuming,
3) It requires the use of some other forecasting technique for estimating
the value of the causal variables.