Factors determining demand forecast
Factors determining demand forecast
First it is important to understand what a person wants to achieve from forecasting. Different categories of goods have their own demand. Hence it is important to decide in which category a good falls.
Mainly three categories of goods can be made-
a. Durable consumer goods
b. Durable consumer goods and
c. Capital goods
Before forecasting the demand of each of these categories, it is necessary to consider some things-
(a) Durable consumer goods
Every durable good has its own special market. Hence the demand of any good can be forecast only by special method. Some special things included in the forecast of demand of consumer durable goods are as follows-
1. Change in the size and characteristics of population- The demand of any consumer good is directly related to the facts related to population- its size, growth rate, age- sex, organization etc. For example, the demand of goods like refrigerator, TV, radio set, furniture etc. depends on the size of houses.
2. Accumulated stock of goods- The size of the accumulated stock of a consumer durable also indicates the replacement period of this good. If the stock is large, it means that its demand is also high. The reverse is also true.
3. Demand for replacement and new purchases- Consumer demand is of two types- replacement of old goods and new purchases. The demand for replacement is made by old consumers while the new demand comes from new consumers. Both these demands are influenced by different factors. Therefore, the forecast for both should also be different.
4. Consumers’ Choice and Preference- The trend of demand in the market can be easily understood by knowing the changes in consumers’ choices.
(b) Non-durable consumer goods
These include those goods which can be used only once. Such as food grains, beverages, tobacco etc. Their demand is mainly influenced by these factors- consumer’s purchasing power, price of the goods and population.
(c) Capital goods
Things from which other things are manufactured are called capital goods. These include factory buildings, machines, equipment, weapons etc. Their demand depends on the demand of those goods in whose manufacture they are used. Hence the demand for capital goods is called ‘derived demand’. The demand for capital goods is of two types-
(a) Replacement demand and
(b) New demand
The following information is required to estimate the demand for capital goods-
1. Possibilities of development of the industries using them.
3. The rate of obsolescence of the product.
4. The stock of the product lying with the producer.
5. The tax rates related to the production of new product by using the product.
6. The market structure in which the manufactured product is in circulation.
