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E.T. Phone Home, Inc.

E.T. Phone Home, Inc. Case Study on Forecasting Business Demand. Group 7. Price Demand Model. Linear Regression Assumptions Linear Regression assumes asymptotic relation between demand and price which may not hold in the long run

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E.T. Phone Home, Inc.

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  1. E.T. Phone Home, Inc. Case Study on Forecasting Business Demand Group 7

  2. Price Demand Model • Linear Regression • Assumptions • Linear Regression assumes asymptotic relation between demand and price which may not hold in the long run • Regression analysis takes data from three Ohio SMSAs other than Cleaveland and aggregates it to achieve statistically higher reliability • Aggregated demand was readjusted to account for 5% greater demand in Cleaveland

  3. Regression Formula Y=A + B/X Where A=5.676 B=1165.86

  4. Basis of Analysis • Price rigidly dictates demand of cellular radio • Penetration rates depend on advertising and equipment costs • Residential segment not represented in sample space • Latent demand ignored

  5. Factors affecting demand • Price of the commodity (PA) • Level of income (Y) • Price of substitute goods • Price of complementary goods • Consumer tastes (T) • DA = f(PA, Y,…., T)

  6. Price Elasticity of Demand “Responsiveness of demand to changes in commodities own price” • Elasticity for • Necessary items < 1 • Luxury items > 1

  7. Price Elasticity of Demand • For cellular radio elasticity > 1 • Thus regression curve for long term will not be asymptotic.

  8. Factors affecting Demand • Internal Factors • Price • Advertising and Promotion • Design • Service network • Customer service • Expansion

  9. Factors affecting Demand • External Factors • Economic background of Cleaveland • Unemployment • Industry • Government regulation and policies • Competition • Customer Perception • Economic cycle

  10. Conclusion • Include elasticity factor in regression analysis • Continue regression results until we get enough data to have time series analysis for short term • Target wireline consumers • Target latent demand which includes residential and other growing sectors • Venture in R&D

  11. Conclusion • Data on general economy to be analyzed on time series • Customer paradigm shift • Promote as status and new age technology

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