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@ . A computer dealer would like to know the
implications of a reduction in excise duties, lower
prices and rising GNP on the demand for
personal computers.
@ . A cigarette manufacturer may be interested in
knowing the impact of increase in excise duties
on cigarettes on its sales.
@ .An Electricity Company while planning to
construct a new power station should know the
likely growth of demand for electricity over the
decade of time.
½
 
  


. Specification of the demand function
2. Adopting the form of demand function
3. Choice of statistical technique
4. Data collection
5. Empirical process
6. Result reporting
7. Interpretation
    

 




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After specification the functional of demand
function is to be decided: whether it will be
linear, quadratic, log linear, double Ȃlog etc.
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@ åor computation choose the appropriate
statistical technique; regression analysis,
descriptive statistics, etc . Ordinarily least
square method is a widely adopted technique
in demand estimation.
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@ Collect the required data for the variables

identified in the demand function.
@ Regression and correlation analysis are
basically used for the empirical measurement
of relationship the degree of association of
determinant variables to demand
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@ Derive the parameter values for the each

variable by running the regression equation.
A suitable computer software programmer
such as SAS or SPSS may be used for this.
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@ he empirical results: value of parameters

and other statistical characteristics and test
details such as R2, D-W test, standard errors
are reported as short- term and long Ȃterm
elasticity, using log Ȃ linear model.
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@ he empirical finding may be interpreted for

the decision making purpose.
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@ . Empirical demand function is the key measure

of statistical demand analysis.

@ . Empirical demand function is essentially

the demand equation derived on the basis of
actual market data.
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@ Simple Regression (two Variables) Model

@ Dx = b0 + bPx + u
@ Where, Dx = Quantity demanded of commodity x
@
@ PX = Price of commodity x
@ u = Unknown determinant of demand/ mis Ȃ
specification/error terms.
@ Multiple Regression (Many Variables) Model
@ Dx = b0 +bPx + b2 M + U
@ log Ȃ linear function (Double log) Model
@ Q = APB Mc
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@ he R-square: Its value ranges between 0 to.
It is used to that overall fit of a regression is
good on not.
@ -statistic: Used to conducts t-test for
considering the statistical significance of a
variable.
@ Rule of thumb: If the value of estimated t is
grater than 2,

  

@ . A computer dealer would like to know the

implications of a reduction in excise duties,
lower prices and rising GNP on the demand
for personal computers.
@ . A cigarette manufacturer may be
interested in knowing the impact of increase
in excise duties on cigarettes on its sales.