Green Souls Ltd.

has a variety of sectors such as textile, cement, electronic appliance and real
estate.
After a thorough review of various capital projects undertaken in last five years, the executive
committee of Green Souls Ltd. felt that the quality of market demand analysis of the project was
somewhat patchy.
As a marketing analyst Mr. Yasir have been invited by Mr. Ariful Islam, the managing director
of Green Souls Ltd. to do a seminar on market and demand analysis for the business head of the
company. Among other issues, he wants to know the following issues.

1. How should one evaluate secondary information?

2. Discuss the step of sample survey?
3. Briefly describe the various methods of demand forecasting?
4. The sell of a certain product during a 14 year period have been as follows:

Period Sales Period Sales

1 2000 8 4000
2 2200 9 3900
3 2100 10 4000
4 2300 11 4200
5 2500 12 4300
6 3200 13 4900
7 3600 14 5300

a. Find the least square regression for the following data given.
b. For the data given in this problem, assume that the forecast for the period 1 was 2100.
If α is equal to 0.3 derives the forecast for the periods 2 to 14 using the exponential
smoothing method.
c. For the given data set, n equals to 3 and develop forecasts for the period 4 to 14 using
the moving average method.

5. i. What is income elasticity of demand? How is it measured?

ii. What is price elasticity of demand? How is it measured?

6. What are the sources of uncertainties of demand? What can be done to cope with
these uncertainties?
Answer 1

Secondary sources of information are based on primary sources. They are generally written at a
later date and provide some discussion, analysis, or interpretation of the original primary source.
Examples of secondary sources include:

 review articles or analyses of research studies about the same topic (also often in peer-
reviewed publications)
 biographies, reviews, or critiques of an author
 analyses of original documents or archival material

While secondary information is available economically and readily, its reliability, accuracy and
relevance for the purpose under consideration must be carefully examined. The Market analysts
should seek to know:

Relevance:

 Is the document related to your on topic?

 Is the information at appropriate depth or level for your assignment?

Authority:

 Is the source a scholarly or popular publication? And is the publisher reputable in this
discipline?
 Is the author a recognized authority in this field of study? What are their credentials?
(And are their credentials related to the subject matter?)
 Do other authors quote from this author's works?
 Is there a means of contacting the author?

Timeliness/Currency:

 When was the document written? (Look for a publication, copyright, or “last updated”
date.)
 Is it recent enough to be relevant to your topic or discipline? Sometimes you are required
to use recently published material; sometimes you must use historical documents.

Validity/Accuracy:

 Does the author provide sources for statistical information?

 Is the data from a valid study (that utilized accepted methodologies for the discipline)?

Argument:

 Analyze the author's argument, the assumptions made, the evidence or data gathered, and
the interpretation of the data.
 Are there any flaws in the author's logic?
  Does the author consider alternate interpretations of the evidence?
 If you discovered that the author ignored other interpretations, is the author attempting to
deceive or manipulate readers?

Coverage:

 Does the author refer to relevant information or data that was available at the time the
work was published?
 Or, does the author use out-of-date information; or ignore information or data that was
available at the time?
 Did the author consider all aspects relevant to the topic?

Bias/Objectivity:

 Does the author state any bias?

 If you discovered any omissions in the coverage of the topic, did this reveal a bias or
prejudice?
 Is the author selling something? Do they have a corporate sponsor?

Answer 2

Typically, a sample survey consists of the following steps:

1. Define the target population

In defining the target population the important terms should be carefully and unambiguously
defined. The target population may be divided into various segments which may have
differing characteristics.   For example, all television owners may be three or four income
brackets.

2. Select the sampling scheme and sample size

There are several sampling schemes: simple random sampling, cluster sampling, sequential
sampling, stratified sampling, systematic sampling, and non-probability sampling.

  3. Develop the Questionnaire

The questionnaire is the principal instrument for eliciting information from the sample of
respondents. The effectiveness of the questionnaire as a device for eliciting the desired
information depends on its length, the types of questions, descriptive and inferential statistics to
be used later for analysis. It also requires knowledge of psychological scaling techniques if the
same are employed for obtaining information relating to attitudes, motivations, and
psychological traits. Industry and trade market surveys, in comparison to customer survey,
generally involve more technical and specialized questions.

4. Recruit and Train   the Field Investigatorsand the wording of questions. Developing the
questionnaire requires understanding of the product/ service and its usage, imagination, insights
into human behavior, appreciation of subtle nuances, and familiarity with the tools of

recruiting and training of field investigators must be planned well since it can be time
consuming. Great care must be taken in recruiting the right kind of investigators and imparting
the proper kind of training to them.

 5. Obtain Information as per   the Questionnaire from the sample of Respondents

Respondents may be interviewed personally, telephonically, or by mail for obtaining

information.

Ans 3

There is a wide range of demand forecasting methods available to the market analysis. The
methods of demand forecast can be classified into three broad categories. They are-

a. Qualitative Methods: These methods rely essentially on the judgment of experts to

translate qualitative information into qualitative estimates. The important
qualitative methods are:
i. Jury of executive method.
ii. Delphi method.
b. Time series projection method: These method generate forecasts on the basis of an
analysis of the historical time series. The important time series projection methods
are:
i. Trend projection method.
ii. Exponential smoothing method.
iii. Moving average method.
c. Casual methods: More analytical than the preceding methods, casual method seek
to develop forecasts on the on the basis of cause effect relationship specified in an
explicate, quantitative manner. The important casual methods are :
i. Chain ratio method.
ii. Consumption level method.
iii. End use method.
iv. Bess diffusion model.
v. Leading indicator method.
vi. Econometric method.
 Ans 4

a. We have to estimate the parameters a and b in the linear relationship

Yt = a + bT
Using the least squares method.
According to the least squares method the parameters are:

∑TY–nTY
b=
∑T2–nT2

a = Y – bT
The parameters are calculated below:
Calculation in the Least Squares Method

T Y TY T2
1 2,000 2,000 1
2 2,200 4,400 4
3 2,100 6,300 9
4 2,300 9,200 16
5 2,500 12,500 25
6 3,200 19,200 36
7 3,600 25,200 49
8 4,000 32,000 64
9 3,900 35,100 81
10 4,000 40,000 100
11 4,200 46,200 121
12 4,300 51,600 144
13 4,900 63,700 169
14 5,300 74,200 196
2
∑ T = 105 ∑ Y = 48,500 ∑ TY = 421,600 ∑ T = 1,015
T = 7.5 Y = 3,464

∑TY–nTY 421,600 – 14 x 7.5 x 3,464

b= =
∑T2–nT2 1,015 – 14 x 7.5 x 7.5

57,880
= = 254
227.5
a = Y – bT
= 3,464 – 254 (7.5)
 = 1,559
Thus linear regression is
Y = 1,559 + 254 T

b. In general, in exponential smoothing the forecast for t + 1 is

Ft + 1 = Ft + α et

Where Ft + 1 = forecast for year ) α = smoothing parameter

et = error in the forecast for year t = St = Ft
F1 is given to be 2100 and α is given to be 0.3
The forecasts for periods 2 to 14 are calculated below:

Period t Data (St) Forecast (Ft) Error Forecast for t + 1

(et St =Ft) (Ft + 1 = Ft + α et)

1 2,000 2100.0 -100 F2 = 2100 + 0.3 (-100) = 2070

2 2,200 2070 130 F3 = 2070 + 0.3(130) = 2109
3 2,100 2109.0 -9 F4 = 2109 + 0.3 (-9) = 2111.7
4 2,300 2111.7 188.3 F5 = 2111.7 + 0.3(188.3) = 2168.19
5 2,500 2168.19 331.81 F6 = 2168.19 + 0.3(331.81) = 2267.7
6 3,200 2267.7 932.3 F7 = 2267.7 + 0.3(9332.3) = 2547.4
7 3,600 2547.4 1052.6 F8 = 2547.4 + 0.3(1052.6) = 2863.2
8 4,000 2863.2 1136.8 F9 = 2863.2 + 0.3(1136.8) = 3204.24
9 3,900 3204.24 695.76 F10 = 33204.24 + 0.3(695.76) = 3413.0
10 4,000 3413 587.0 F11 = 3413.0 + 0.3(587) = 3589.1
11 4,200 3589.1 610.9 F12 = 3589.1 + 0.3(610.9) = 3773.4
12 4,300 3772.4 527.6 F13 = 3772.4 + 0.3(527.6) = 3930.7
13 4,900 3930.7 969.3 F14 = 3930.7 + 0.3(969.3) = 4221.5

c. According to the moving average method

St + S t – 1 +…+ S t – n +1
Ft + 1 =
n
where Ft + 1 = forecast for the next period
St = sales for the current period
n = period over which averaging is done

Given n = 3, the forecasts for the period 4 to 14 are given below:

Period t Data (St) Forecast (Ft) Forecast for t + 1
Ft + 1 = (St+ S t – 1 + S t – 2)/ 3

1 2,000
2 2,200
3 2,100 F4 = (2000 + 2200 + 2100)/3 = 2100
4 2,300 2100 F5 =(2200 + 2100 + 2300)/3= 2200
5 2,500 2200 F6 = (2100 + 2300 + 2500)/3 = 2300
6 3,200 2300 F7 = (2300 + 2500 + 3200)/3= 2667
7 3,600 2667 F8 = (2500 + 3200 + 3600)/3 = 3100
8 4,000 3100 F9 = (3200 + 3600 + 4000)/3 = 3600
9 3,900 3600 F10 = (3600 + 4000 + 3900)/3 = 3833
10 4,000 3833 F11 = (4000 + 3900 + 4000)/3 =3967
11 4,200 3967 F12 =(3900 + 4000 + 4200)/3 = 4033
12 4,300 4033 F13 = (4000 + 4200 + 4300)/3 = 4167
13 4,900 4167 F14 = (4200 + 4300 + 4900) = 4467
14 5,300 4467

5.
i. Income Elasticity of demand: The income elasticity of demand reflects the responsiveness of
demand to variations in income. It is measured as follows:

Q1 – Q2 I1 + I2
Income Elasticity of Demand E1 = x
I2 - I1 Q2 +Q1

E1 = Income Elasticity of Demand

Q1 = Quantity demanded in the base year
Q2 = Quantity demanded in the following year
I1 = Income level in base year
I2 = Income level in the following year

iii. Price Elasticity of demand: The price elasticity of demand measures the
responsiveness of demand to variations in price.

Q2 – Q1 P1 + P2
Price Elasticity of Demand = Ep = x
P2 –P1 Q2 + Q1
P1 , Q1 = Price per unit and quantity demanded in the base year
P2, Q2 = Price per unit and quantity demanded in the following year
Ep = Price Elasticity of Demand