Textile Industry
MANAGERIAL ECONOMICS
ASSIGNMENT
ON
USING ELASTICITIES IN MANAGERIAL DECISION MAKING
Pertaining to the TEXTILE INDUSTRY
(Cotton garments)
Submitted by:
WEAVERS:
Gloria D Souza
Madhumitha .P
Mohita.V
Preeti M Prasanna
Suman Sourav Rout
REGAL GARMENTS manufactures ladies garments. Considering a garment of the raglan style the following regression equation has been constructed.
Case 1: Gₐ = 40 – 3 Pₓ+ 1.5 I +1.2 S – 1D + 0.3M
Where G = the sales of raglan garment in India in thousands per year. Pₓ = price of each raglan garment I = personal disposable income in thousands per year S = price of the synthetic raglan garment D = the cost of processing (desizing, scouring, bleaching, dyeing) per garment M = the cost of marketing put forth by REGAL GARMENTS calculated per garment
For the year 2011, Pₓ = Rs.50; I = Rs.60; S = Rs.40; D = Rs.10; M = Rs.2
Substituting the values in the regression equation we have;
G = 40 – 3(50) + 1.5(60) + 1.2(40) – 1(10) + 0.3(2) = 18.6
This indicates that the annual sales of the industry are 18,600 garments/ year.
Now, finding the elasticity of demand of raglan with respect to the above mentioned factors, we have:
E (Pₓ) = -3 (50/18.6) = - 8.06
E (I) = 1.5 (60/18.6) = 4.84
E(S) = 1.2(40/18.6) = 2.58
E (D) = -1 (10/18.6) = -0.53
E (M) = 0.3(2/18.6) = 0.03
Case 2: With these figures in mind, we can forecast the growth in sales for the year 2012, with the following changes in determinants of demand:
Price: increased by 5 %
Personal disposable income: 2% fall
Price of synthetic raglan garment: increased by 3%
Processing cost: increase by 4%
Marketing cost: increase by 10%
Gₐ = G{ 1+E(Pₓ)[ΔPₓ/Pₓ] + E(I)[ΔI/I]+E(S)[ΔS/S]+E(D)[ΔD/D]+E(M)[ΔM/M]} = 18.6{1+ (-8.06*0.05) + (4.84*-0.02) + (2.58*0.03) + (-0.53*0.04) + (0.03*0.1)
= 10.40
This indicates that the annual sales of the company would come down to 10400 garments per year
ASSIGNMENT
ON
USING ELASTICITIES IN MANAGERIAL DECISION MAKING
Pertaining to the TEXTILE INDUSTRY
(Cotton garments)
Submitted by:
WEAVERS:
Gloria D Souza
Madhumitha .P
Mohita.V
Preeti M Prasanna
Suman Sourav Rout
REGAL GARMENTS manufactures ladies garments. Considering a garment of the raglan style the following regression equation has been constructed.
Case 1: Gₐ = 40 – 3 Pₓ+ 1.5 I +1.2 S – 1D + 0.3M
Where G = the sales of raglan garment in India in thousands per year. Pₓ = price of each raglan garment I = personal disposable income in thousands per year S = price of the synthetic raglan garment D = the cost of processing (desizing, scouring, bleaching, dyeing) per garment M = the cost of marketing put forth by REGAL GARMENTS calculated per garment
For the year 2011, Pₓ = Rs.50; I = Rs.60; S = Rs.40; D = Rs.10; M = Rs.2
Substituting the values in the regression equation we have;
G = 40 – 3(50) + 1.5(60) + 1.2(40) – 1(10) + 0.3(2) = 18.6
This indicates that the annual sales of the industry are 18,600 garments/ year.
Now, finding the elasticity of demand of raglan with respect to the above mentioned factors, we have:
E (Pₓ) = -3 (50/18.6) = - 8.06
E (I) = 1.5 (60/18.6) = 4.84
E(S) = 1.2(40/18.6) = 2.58
E (D) = -1 (10/18.6) = -0.53
E (M) = 0.3(2/18.6) = 0.03
Case 2: With these figures in mind, we can forecast the growth in sales for the year 2012, with the following changes in determinants of demand:
Price: increased by 5 %
Personal disposable income: 2% fall
Price of synthetic raglan garment: increased by 3%
Processing cost: increase by 4%
Marketing cost: increase by 10%
Gₐ = G{ 1+E(Pₓ)[ΔPₓ/Pₓ] + E(I)[ΔI/I]+E(S)[ΔS/S]+E(D)[ΔD/D]+E(M)[ΔM/M]} = 18.6{1+ (-8.06*0.05) + (4.84*-0.02) + (2.58*0.03) + (-0.53*0.04) + (0.03*0.1)
= 10.40
This indicates that the annual sales of the company would come down to 10400 garments per year