ASSIGNMENT OF

MANAGERIAL ECONOMICS

SUBMITTED TO: SUBMITTED BY:

Dr. KAVITA SRIVASTAV A Suman Sen
PGDM-(TRIMESTER 2010-12)

Sec. B

Question
What is the significance of demand forecasting in business
decisions? Using the method of least square method,
compute the trend values for the next 6 years i.e. 1987,
1988, 1989,1990, 1991.
 
Year 1981 1982 1983 1984 1985 1986
Sales 50 62 15 78 48 74

ANSWER
Significance of demand forecasting in business:-

 To predict the demand of the product

To determine the quantity of production.
The promotional strategies can be framed.
To control over production & lower
production
Efficient demand forecasting contributes to
capture large market share.
 x2
YEAR SALES{Y X XY Estimated
} trends
1981 50 -2.5 6.25 -125 44.425
1982 62 -1.5 2.25 -93 47.545
1983 15 -.5 .25 -7.5 52.485
1984 78 .5 .25 39 56.515
1985 48 1.5 2.25 72 60.545
1986 74 2.5 6.25 185 64.575
TOTAL ∑ 327 ∑0 ∑ 17.5 ∑ 70.5

X=a-year
a= [1983+1984]/2=1983.5

∑Y= na + b∑x [1]

∑xy =a∑x+ b∑ x 2
[2]
Putting the values in equation-1
327= 6a + b*0
a= 54.5
Putting the values in equation-2
70.5= a*0 + 17.5b
b= 4.03
 WE CAN FIND TRENDS FOR THE NEXT SIX YEARS BY
PUTTING THE VALUES IN THE GIVEN FORMULA.

Y = a + bx
Y= the year for which the trend are to be find out.

1981 = 54.5 + 4.03*-2.5

= 44.425 ans
1982 = 54.5 + 4.03*-1.5
= 47.545 ans
1983 = 54.5 + 4.03*-0.5
= 52.485 ans
1984 = 54.5 + 4.03*0.5
= 56.515 ans
1985 = 54.5 + 4.03*1.5
= 60.545 ans
1986 = 54.5 + 4.03*2.5
= 64.575 ans
1987 = 54.5 + 4.03*3.5
= 68.605 ans
1988 = 54.5 + 4.03*4.5
= 72.635 ans
1989 = 54.5 + 4.03*5.5
= 76.665 ans
1990 = 54.5 + 4.03*6.5
= 80.695 ans
1991 = 54.5 + 4.03*7.5
= 84.725 ans
1992 = 54.5 + 4.03*8.5
= 88.755 ans