Demand Estimation, Elasticity, and Forecasting of LG Air Conditioners: A Case Study of MASHALLAH Electronics

14 Pages Posted: 2 Jun 2011

See all articles by Dr. Furrukh Bashir

Dr. Furrukh Bashir

University of the Punjab (PU) - Department of Economics; The Islamia University of Bahawalpur, Pakistan

Bilal Inam

IMS, B. Z. University, Multan

Hafiz Muhammad Ali Basit

IMS, B. Z. University, Multan

Muhammad Waqas Iqbal

IMS, B. Z. University, Multan

Shoaib Javeed

IMS, B. Z. University, Multan

Asim Mehmood

IMS, B. Z. University, Multan

Date Written: May 30, 2011

Abstract

Electronic market in Pakistan now a days deal with an uncertain and varying business environment due to incessant change in technology and economic conditions. The objective of study is to calculate Elasticities, demand estimation, and forecasted demand of L.G air conditioner. Time series data for the period of 2002 to 2003 on quarterly basis is taken from MASHALLAH electronics. Price of L.G, price of Mitsubishi, price of electricity, advertisement expenditures, and total sale of firm use as explanatory variables. For Estimation of demand, linear demand model is specified by using independent variables and then multiple regression technique is applied on model and results show that price of L.G and price of Mitsubishi is negative related with demand and price of electricity, advertisement expenditures and total sale are positive related with demand. Double log demand model is specified for calculation of Elasticities and regression analysis reveals that price elasticity of demand is -2.82, cross price elasticity of demand w.r.t price of Mitsubishi is -0.02, cross price elasticity of demand w.r.t price of Electricity is 1.08, and advertisement elasticity of demand is 0.07, and total sale elasticity of demand is 0.23. Forecasted values of independent variables for 1st quartet of 2011 is calculated at two different weights 0.5 and 0.7 by using exponential smoothing method and selected those values whose root mean square error is low putting the value in estimated demand equation and find out that forecasted demand of LG should be of 64 units in the 1st quarter of 2011.

Keywords: demand estimation and forecasting, 2002 1st quarter – 2010 4th quarter, MASHALLAH electronics, econometric forecasting, prices of LG, prices of electricity

Suggested Citation

Bashir, Furrukh and Inam, Bilal and Ali Basit, Hafiz Muhammad and Iqbal, Muhammad Waqas and Javeed, Shoaib and Mehmood, Asim, Demand Estimation, Elasticity, and Forecasting of LG Air Conditioners: A Case Study of MASHALLAH Electronics (May 30, 2011). Available at SSRN: https://ssrn.com/abstract=1855594 or http://dx.doi.org/10.2139/ssrn.1855594

Furrukh Bashir (Contact Author)

University of the Punjab (PU) - Department of Economics ( email )

Lahore
Pakistan

The Islamia University of Bahawalpur, Pakistan ( email )

Bahawalpur, Punjab 63100
Pakistan

Bilal Inam

IMS, B. Z. University, Multan ( email )

1-A, E-5, Phase VII
Hayatabad
Multan, Khyber Pakhtunkhwa 25000
Pakistan

Hafiz Muhammad Ali Basit

IMS, B. Z. University, Multan ( email )

1-A, E-5, Phase VII
Hayatabad
Multan, Khyber Pakhtunkhwa 25000
Pakistan

Muhammad Waqas Iqbal

IMS, B. Z. University, Multan ( email )

1-A, E-5, Phase VII
Hayatabad
Multan, Khyber Pakhtunkhwa 25000
Pakistan

Shoaib Javeed

IMS, B. Z. University, Multan ( email )

1-A, E-5, Phase VII
Hayatabad
Multan, Khyber Pakhtunkhwa 25000
Pakistan

Asim Mehmood

IMS, B. Z. University, Multan ( email )

1-A, E-5, Phase VII
Hayatabad
Multan, Khyber Pakhtunkhwa 25000
Pakistan

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