Demand estimation is a method involving estimations of the demand amount of goods or services. The estimations are for a defined timeline and help with pricing. The demand estimations can be computed from a regression equation. Demand estimation provides the market operators with statistical information on the possible future behavior of the market.
Computations of Elasticity
If the maker of a leading brand of low-calorie microwavable food has a demand function of QD = - 5200 Ė 42P + 20C + 5.2(I) + 0.20(A) + 0.25(M)
(2) (17.5) (6.2) (2.5) (0.09) (0.21) R2 = 0.55 n = 26 F = 4.88 where (P) is price of the product, (A) is the advertising expenditure, and (C) is the price of leading competitorís product. (I) is the per capita income in the area, and (M) the number of microwave ovens sold in the area. Assuming the following values for the independent variables:
QD = Quantity demanded
P (in cents) = Price of the product = 500
C (in cents) = Price of leading competitorís product = 600...