Agroindustrial project analysi

THE MARKETING FACTOR 65ence of approximately 10 percent in the 1968 projected volumescould have a significant effect on the firm's finances and capacityrequirements.Regression analysis is commonly used to determine demand, withprice or income changes, by deriving elasticity coefficients. Elasticityestimates can be calculated from cross-sectional data from familyexpenditure surveys. The elasticity coefficient, e, is expressedmathematically as:_AQ/Qin which Q is quantity demanded and P is price. The change in salesresulting from a change in price is an indicator of consumer pricesensitivity. When the percentage change in demand is greater thanthe change in price (a coefficient greater than 1.0), the demand iselastic. When the reverse is true, the demand is inelastic. When thetwo changes are equal and produce a coefficient of 1.0, there isunitary elastic demand. When elasticity is less than 1.0, demand issaid to be inelastic. The concept of elasticity is also applied todemand changes that are a result of income changes.Econometric methods attempt to measure the relations betweenseveral variables assumed to be demand determinants and tospecify the degree of confidence that can be placed in those relations.Several sets of regression equations are used. The three aspectsof econometric demand models are identifying the variables,specifying the relations, and making the projections. These modelsintegrate the relations of multiple variables in the estimate; thus,they more accurately reflect reality. The main causal methods maybe defined as follows :19* Simple regression. The analyst statistically relates one possibleexplanatory variable to sales.* Multiple regression. Same as above, except that more than oneexplanatory variable (with intercorrelations) is used.* Simultaneous equation systems. The analyst uses a set of interdependentregression equations.* Input-output analysis. The analyst uses a system of linearequations that indicates which inputs are needed to obtaincertain outputs.19. Ibid.