Demand Forecasting, Oligopoly Market, Cost-Minimization and Utility Maximization

Economic Assignment 1
ECONOMIC ASSIGNMENT
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Economic Assignment 2
1. Demand forecasting is never a speculative exercise into unknown but a reasonable
judgment of future probabilities of market events hinged on scientific backgrounds. Qualitative
forecast usually entail enormous quantities of subjective judgments because there are many
personal opinions and additional human factors, accurate and reliability are often the huge
concerns. While quantitative methods are increasingly objective and scientific. It usually engage
historical data, and by utilizing mathematical models in processing such information to find out
the trends embedded in data. Demand forecasting is imperative to each business because demand
is a key driver in each business. Without demand for the firms’ goods and services, no business
will exist (Daganzo 2014). The business has to maintain a delicate balance between demand and
supply which is only achievable through demand qualitative or quantitative forecasting to predict
the demand. Demand forecasting thus allows planning of new facilities by making the operation
managers to have adequate time to build factories and install required processes to produce
product as and when required.
Qualitative methods include Jury of Executive Opinion; Executive Opinion; Expert
Opinion, Delphi Method, sales forces survey and consumer survey. Using Jury of Executive
Opinion Method, executives are asked individually to give their expert opinion on anticipated
demand during particular time duration (Hamzaçebi 2016). A single estimate is got by
aggregating the individual estimates. It has the advantage of allowing for a broad array of factors
to be taken into account but is only attached to various biases that can affect forecast accuracy as
expert can be biased during forecasting. With expert opinion, stakeholders engaged in different
organization’s business elements are bunched up and attain consensus by each distinctly bunched
up cohort like suppliers or retailers and the final overall estimate is determined per expert
opinion of each distinct group. With Delphi method, mail survey is utilized for extracting expert

Economic Assignment 3
opinions of expert group. A summary is done of responses of experts is done without revealing
the expert identity and subsequently mailed further to experts alongside questionnaire
(engineered) to explore reasoning behind extreme opinions proffer in 1st round. The process is
extended to one or more until a reasonable agreements is achieved among the experts. Delphi is
the most successful method where relevant knowledge is dispersed among the experts.
Quantitative methods include time series and causal methods and rely on mathematical models
as opposed to qualitative which depends on expert judgments. Causal demand forecasting
method is used in producing forecasting anchored on strong cause and effect connection between
independent variables and demand variable (dependent variable) and include regression analysis,
index method and segmentation. It is extremely accurate method. Time series is applied where
the variables shows distinct trends in previous horizon and the identified trend will thrive into
future. The series are collected and used to generate models. It is mostly applied when there is no
unique downward or upward trend in historical data being probed. Thus, causal demand
forecasting remains the best for forecasting “expensive mobile” because it the most accurate of
all methods. Regression analysis, for example, allows evaluation of relationship between one or
more explanatory variable (price of mobile) and dependent variable (demand for the mobile).
2. The market characterized by competition among few is the oligopoly market. It is
different from competition among many in a number of ways. It is dominated by small number
of large firms whereas competition among many has many small firms. Another difference is
that firms in oligopoly sell either similar or differentiated commodities as opposed to
competition among many that sell identical products only (Feng, Li and Li 2014). The industry
in which oligopoly operate has significance barrier to entry unlike in the competition among
many which has no barrier to entry. The oligopoly promote their own interest through the