Demand Estimation & Forecasting

Why it is important to conduct Demand Estimation and Forecasting? Introduction

Everyone predicts the future in some way or the other; we as humans do not have a perfect understanding and knowledge of our future, but we are curious to know what the future might be. Being prepared for the future keeps us all on track, and the better we predict the future, the better we plan things for it. In order to predict the future, we must rely on our past experiences, as the common saying goes “history repeats itself”. When we keep a close eye on the various patterns, and study patterns accurately, we are able to guess the future better. In the same way, firms and organizations' also make demand estimations and forecasts.

Thesis

Why is it important to conduct Demand Estimation and Forecasting? The answer to this question is very simple, firms and organizations estimate the demands of their goods and services in order to have some certainty of the future. However, this is a simple thought and this question needs to be explored in much more detail. The purpose of this paper is to answer this question thoroughly. This research paper is designed in the following manner; firstly, it aims at exploring Demand itself, and how demand is tied in with different factors. Then, the paper talks about what Forecasting is, and why Demand needs to be Forecasted. Moreover, the paper goes onto explore the two different types of Forecasting strategies, which are mainly Qualitative and Quantitative. These two strategies have various methods (sub-headings) which are explained in detail as well. Finally, three of methods of Forecasting, which can also be used in everyday life are discussed.

Discussion

Meaning of Demand

Demand refers to people's needs and wants for products and services in the market. When we speak of demand in an economical sense, it at first appears as a simple concept. Demand for any product is often linked to the price of that product, and we tend to think that demand of a certain product is inherently linked to its price. A very common graph is usually presented, in text-books, to show how demand is calculated:

However, eventually, the concept does not remain simple when we go in the depths of analyzing different types of goods and services; demand of these are never simply about of their prices, but there are many other factors which effect demand. Demand itself can be broadly divided into two main categories

Direct Demand is the demand of goods and services of customers, and these goods and services usually are for example clothes, house etc.

Derived Demand is the demand of goods and services of firms and manufacturers, for example machines and tools. This type of demand depends upon the demands of the final goods and services.

Description of Estimation and Forecast of demand

It seems like Demand estimation is knowledge and calculation of current demand, whereas Demand Forecasting is the predicting what the demand is going to be in the ...