Question

An organization faces several internal and external risks in economic decision, such as high competition, failure of technology, labor unrest, inflation, recession, and change in government laws.Therefore, most of the business decisions of an organization are made under the conditions of risk and uncertainty.An organization can lessen the adverse effects of risks by determining the demand or sales prospects for its products and services in future. Demand forecasting is a systematic process that involves anticipating the demand for the product and services of an organization in future under a set of uncontrollable and competitive forces.

Question 01: In your opinion, explain with examples how Economic Decision analysis is important in Demand Forecasting and cost.

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Note: Please give a good answer at least 500 words with good headings and please do not copy paste from internet

Answer 1

Demand Forecasting and Cost:

Demand Forecasting is a systematic and scientific estimation of future demand for a product. Simply, estimating the sales proceeds or demand for a product in the future is called as demand forecasting. An organization can lessen the adverse effects of risks by determining the demand or sales prospects for its products and services in future. Demand forecasting is a systematic process that involves anticipating the demand for the product and services of an organization in future under a set of uncontrollable and competitive forces. Through assessing potential competition or market projections for its goods and services, an company may decrease the negative effects of threats. The market forecasting is a systematic mechanism requiring expectation in the future, in an uncontrollable and dynamic manner, of the need for an organization's goods and services.

Demand plays a key role in controlling all companies. It allows an company to reduce business risks and make effective business decisions. Besides this, the market forecasting offers an insight into the capital spending and expansion decisions of the company.

In my opinion, the demand forecasting is the prediction made for the product of the company i.e. how demand for a good or a service changes in the future. It is based on the past values and demand of the product and the current market situation.

The demand forecasting plays a crucial role in the output decision of the firm, i.e. whether to increase production and invest in fixed factor or decrease the production. If the demand for a product is increasing, the company can earn a huge economic profit by increasing the production, otherwise it lead to excess demand in the market. It also decreases the risk of the firm by anticipating the future consequence, and hence all the firm exercise demand forecasting for its product.

It helps business to make profitable and economic decisions about the production, planning for the future investment in fixed capital, managing funds and deciding the price of the product etc. The economic decision whether the marginal cost is higher or lower than the marginal revenue if we increase the production have to made in forecasting.