Question

A team of analysts at Amazon is researching the viability of producing a smart watch. How might they estimate potential demand for their smart watch?

a. Consider the four-step process that many companies follow to estimate the market demand curve for their product. Place the steps in order, with the first step in the highest position and the last step in the lowest position.

survey customers

plot the demand curve

scale up the quantities demanded by the survey respondents

add up the total quantity demanded by the customers at each price point

b. Select two factors that the analysts want to keep in mind to create the most accurate demand estimates.

cost of inputs to production

information about climate change

existing competition in the market

consumer demographic information

Answer 1

a. The four step process that many companies follow to estimate the market demand curve for their product are as follows:

1. Survey customers

2. Scale up the quantities demanded by the survey respondents

3. Add up the total quantity demanded by the customers at each price point

4. Plot the demand curve

b. In order to create the most accurate demand estimates, the two factors that analyst should keep in mind are as follows:

1. Existing competition in the market because more is the competition in the market less is the demand for the product and less is the competition in the market more is the demand of the product.

2. Consumer demographic information or age group of the consumers also plays an important role in determining demand of the product.