Demand in economics means effective demand,
that is one which meets with all its three crucial
characteristics; desire to have a good, willingness to
pay for that good & ability to pay for that good.
In absence of any of these three characteristics,
there is no demand.
Demand forecasting means estimation of the
demand for the good in the forecast period.
It is a process of estimating a future event by
casting forward past data.
The past data are systematically combined in a
predetermined way to obtain the estimate of future
How far ahead the long-term forecast goes.
Should the forecast be general or specific?
Problems & methods of forecasting are usually different
for new products from those for products already well
established in the market.
It is important to classify the products as producer
goods, consumer durable, or consumer goods &
Finally, in every forecast, special factors peculiar to the
product & the market must be taken into account.
Purpose of short-term forecasting
Appropriate production scheduling so as to avoid the
problem of over-production & the problem of short-
Helping the firm to reducing costs of purchasing raw
Determining appropriate price policy.
Setting sales targets & establishing controls &
Evolving a suitable advertising & promotion programme.
Forecasting short-term financial requirements.
Planning of a new unit or expansion of an existing unit. A
multi-product firm must ascertain not only the total
demand situation, but also the demand for different
Planning long-term financial requirements. As planning
for raising funds requires considerable advance notice,
long –term sales forecasting are quite essential to
assess long-term financial requirements.
Planning man-power requirements. Training & personnel
development are long-term propositions, taking
considerable time to complete.
Short-term forecasts; short-term forecasts