Case I.docx

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CASE2 IT Industry: Checkered Growth

ANS Q2

Trend projection method is a classical method of business forecasting. This method is essentiallyconcerned with the study of movement of variable through time. The use of this method requiresa long and reliable time series data. The trend projection method is used under the assumptionthat the factors responsible for the past trends in variables to be projected (e.g. sales and demand)will continue to play their part in future in the same manner and to the same extend as they did inthe past in determining the magnitude and direction of the variable.

There are three (3) techniques of trend projection based on timeseries data.

1. Graphical Method: - under this method, annual sales data is plotted on a graph paperand a line is drawn through the plotted points. Then a free hand line is so drawn that the

total distance between the line and the point is minimum. Although this method is verysimple and least expensive, the projections made through this method are not veryreliable. The reason is that the extension of the trend line involves subjectivity and

personal bias of the analysis.

SaleYears /Trend ProjectionFitting Trend Equation: Least square method: - Fitting trend equation is a formal technique ofprojecting the trend in demand. Under this method, a trend line (or curve) is fitted to the timeseries data with the aid of statistical techniques. The form of the trend equation that can be fittedto the time series data is determined either by plotting the sales data or by trying different forms

of trend equations for the best fit.

o When plotted, a time series date may show various trends. The most commontypes of trend equation are

1) liner and2) exponential trends

Linear Trend: - When a time series data reveals a rising trend in sales than a straight-linetrend equation of the following form is fitted. (S = A + BT ; Where S = annual sales , T =Time (in year) , A & B are constant. The parameter b given the measure of annual

increase in sale

3. Exponential trend:- When sales ( or any dependent variable) have increased over the pastyears at an increasing rate or at a constant percentage rate, than the appropriate trendequation to be used is an exponential trend equation of any of the following type ( Y =aebt , Or its semilogarithmic form -> Log y = = log a + bt; This form of trend equationis used when growth rate is constant.


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Double log trend equation of equation

Y = aTB

Or its double logarithmic form Log y = log a + b log t This form of trend equation is used when growth rate is increasing.

Limitation

The first limitations of this method arise out of the assumption that the past rate of change in thedependent variable will persist in the future too. Therefore, the forecast based on this methodmay be considered to be reliable only for the period during which this assumption holds.

Second, this method cannot be used for short-term estimates. Also it cannot be used where trendis cyclical with sharp turning points of trough and perks.

BoxJenkins Method: - This method of forecasting is used only for shortterm predictions.Besides, this method is suitable for forecasting demand with only stationary time series salesdata. Stationary time series data is one, which does not reveal long term trend. In other words,Box-Jenkins technique can be used only on those cases in which time-series analysis depictsmonthly or seasonal variation recurring with some degree of regularity.

1. Ans to 3 Compute a 3 year moving average forecast for the years 1997-98 through 2003-04.

Weegy: The average daily balance method of calculating finance charges uses the average ofyour balance during the billing cycle. [ [ Your average daily is the sum of your balance on eachday of the billing divided by the number of days in the billing cycle. Here is the calculation forthe average daily balance method: average daily balance * APR * days in billing cycle / 365*Calculating the Average Daily Balance Let?s say your APR is 12% and your billing cycle is 25days long. You started the billing cycle with a balance of $100. On Day 4, you made a $100purchase. On Day 20, a $25 payment was credited to your account. Your daily balance duringthe billing cycle was: Day 1 ? 3: $100 Day 4 ? 20: $200 ($100 purchase) Day 20 ? 25: $175 ($25credit) To calculate your average daily balance you must total your balance from each day in thebilling cycle and divide by the number of days in the cycle. (Day 1 Balance + Day 2 Balance +Day 3 Balance?) / number of days in billing cycle $4575 / 25 = $183 Calculating the AverageDaily Balance Finance Charge Based on the details listed above, your finance charge using theaverage daily balance method would be: $183 * .12 * 25 / 365 = $1.50 If you continued makingminimum payments and no additional charges on this account, you'd pay $18.00 in financecharges over the course of a year


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CASE4

1.Is stock market a good example of perfect competition? Discuss.

The stockarket is an example of perfect competition in that everyone has the same chances of

ups and downs in a certain market. Laws also help to ensure it's perfect competition by makininsider trading illegal. In theory, a stock market is perfect competition. However, in reality, it isactually an example of very poor competition. Both in laws and in actual construction, stockmarkets heavily favor those able to purchase super-high-speed computers (and host them in theexchange itself), and also tend to restrict information to a advantaged few while denying it to the

majority of users. The outcome is that a stock market actually is very imperfect competition,heavily favoring the established members of the exchange over the ordinary exchange trader.

Answer 2 It isn't. As a technical term in Economics, "perfect competition" is the (ideal ortheoretical) market structure characterised by a large number of price-taking producers withidentical U-shaped cost curves (the minimum of the firm cost curve occurring at an output small

in comparison with market demand), who face no barriers to entry, producing a uniform productand selling it to a large number of price-taking consumers, without collusion or price-discrimination. The stock market is characterised by non-uniform commodities (shares in

different companies) each with a monopoly supplier. If anything it's an example ofmonopolistic competition, not perfect competition.

Weegy: It is not a level playing field. Just a few problems: People manipulate stock prices(especially low priced ones) by hyping them up or artificially inflating them while they take theother side (i.e. short the stock). Insider trading. [ Some people get the scoop on a stock and tradeit before the general public gets the news. Front trading. A broker or specialist will see a bigorder coming in to either buy or sell. They then buy or sell from their account before executing

the big order thus gaining profit that other people don't have a chance to get.

2.Identify the characteristics of perfect competition in the stock market setting.

3.Can you find some basic aspect of perfect competition which is essentially absent instock market?

When economists analyze the production decisions of a firm, they take into account the structureof the market in which the firm is operating. The structure of the market is determined by fourdifferent market characteristics: the number and size of the firms in the market, the ease with

which firms may enter and exit the market, the degree to which firms' products are differentiated,and the amount of information available to both buyers and sellers regarding prices, productcharacteristics, and production techniques.

Four characteristics or conditions must be present for a perfectly competitive market structure toexist. First, there must be many firms in the market, none of which is large in terms of its sales.Second, firms should be able to enter and exit the market easily. Third, each firm in the market


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produces and sells a nondifferentiated orhomogeneous product. Fourth, all firms and consumersin the market have complete information about prices, product quality, and productiontechniques.

Pricetaking behavior. A firm that is operating in a perfectly competitive market will be aprice

taker. A price

taker cannot control the price of the good it sells; it simply takes the marketprice as given. The conditions that cause a market to be perfectly competitive also cause the

firms in that market to be pricetakers. When there are many firms, all producing and selling thesame product using the same inputs and technology, competition forces each firm to charge thesame market price for its good. Because each firm in the market sells the same, homogeneousproduct, no single firm can increase the price that it charges above the price charged by the otherfirms in the market without losing business. It is also impossible for a single firm to affect themarket price by changing the quantity of output it supplies because, by assumption, there aremany firms and each firm is small in size.

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