Demand Estimation, Elasticities and Forecasting for Dalda Banaspati: An Empirical Analysis
15 Pages Posted: 30 May 2011 Last revised: 7 Jun 2011
Date Written: May 29, 2011
The main purpose of our study is to estimate the demand equation, and by using this equation we have to forecast the future demand. Economic theory postulates that the demand for a commodity arises from the consumers’ willingness and ability (i.e., from their desire and want for the commodity backed by the income) to purchase the commodity. So to forecast demand we have collected actual data on demand of Dalda, price of Dalda, price of Hoor and total sales from Jan 2008-Dec. 2009. By using the multiple regressions, we have formulated the demand equation from actual data, and then we have forecasted the values by using exponential smoothing technique for all independent variables. Forecasted demand for the Jan of 2010 is 2072.2921, Quantity demanded will increase by 272.2921 (15 percent) for Jan 2010 as compared to the Jan of 2008. We find that price elasticity is -0.825279 it means that demand of Dalda lie in inelastic portion, it means that if price increase or decrease, there is less impact on the quantity demanded. Cross price elasticity of sultan is positive, its value is 0.4964 it shows that it is substitute commodity. Cross price elasticity of Hoor should be positive, but according to our result its value is -2.718552, which means that in this specific area people are using Hoor as a complementary product. Cross price elasticity of total sales is 1.7299.
Keywords: Multiple regression analysis, Demand estimation and forecasting, Elasticities, Price of Dalda, Total Sales
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