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Good afternoon and welcome to nptel project
on econometric modelling. This is rudra pradhan
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here, today we will discuss this structure
of econometric modelling so before we know
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about structure of econometric modelling it
is better to know its agenda so the agenda
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of econometric modelling is to enter into
future so that means it is all about forecasting.
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Forecasting is a process of entering into
future by using past and present information
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that is with respect to econometric inputs
and econometric outputs. Econometric inputs
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includes the theory basic theory the problems,
mathematical theory, statistical theory, information
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what we call data stast statistical tools
like softwares computing methodology and knowledge
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interpretation etcetera.
In the output sides so it includes estimation,
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inference, forecasting, evaluations and assessment.
So, now so forecasting is all about to integrate
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the econometric inputs and econometric outputs.
So, now so how you have to do this things?
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So, it is basically basically the question
of entering into the futures or future development.
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So, future development basically function
of past informations and present informations
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ok.
So, now so it is the question of solving complex
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problem into simplex problems. Now the question
is how? So, there are there are various ways
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we have to do there are many you can say criteria
you have to you have to designs now I will
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give you the indication how econometric model
can help to solve this particular you can
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say issue?
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So, econometric modelling basically based
on certain steps through which we can solve
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any particular problems so now the structure
of econometric modelling starts with the the
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problems statement ok.
So, this step 1 step 1 process is problem
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statement which basically derives from existing
theory so problem statement we have to derive
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from theory.
Then step 2 in the step 2 we have to transfer
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the problem into mathematical form of this
models mathematical form of the form of the
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models ok.
So, now what is all above mathematical form
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of the model it is just the transformation
of row information into certain mathematical
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equation so it is the theoretical a transformation
of theoretical information into quantity information
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so basically it is an indication of deterministic
models it is an indication of deterministic
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model ok.
So, now once you have mathematical form of
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the model then it has to be transfer into
statistical form of the model so this step
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3 process step 3 process is nothing but, statistical
statistical form of the form of the model
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now once you have statistical form of the
model it is nothing but, stochastic model
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it is nothing but, stochastic model alright.
So, now we move to step 4 the step 4 process
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is that you need to have informations which
we call it into data so data has to be they
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are to investigate the statistical models
so that means the whole idea is we have to
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bring a problem from the existing theory then
that problem has to be transfer into mathematical
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form of the model then that mathematical form
of the model can transfer into statistical
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form of the model.
So, now our objective is to investigate this
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statistical form of the models so that means
we have to verify the edge existing theory
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and existing problems. So, now to do that
we must have a informations so that is what
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we call it data now once you have a data then
you have to process it properly.
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So, now in the step 5 in the step 5 we the
data has to be you can process through some
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econometric technique so then we have we have
we have the component called as a estimated
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models ok or model estimations or model estimations
model estimations.
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Now, once you have estimated model then next
step is is the reliability of the models a
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step 6 we have reliability reliability of
the estimated model reliability of the estimated
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model now the step 5 is very crucial here
because before this a step there are certain
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procedures and after this step there are certain
procedures so it is the middle between this
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a econometric structures. So, now what is
all about the model reliability model reliability
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basically deals with certains you can procedures.
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Let’s once again I write it here step 6
this is what it is is called as a model reliability
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which is derive through model estimations
so model reliability is basically basically
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three three components one is called as a
goodness of fit test goodness of fit test
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then second is a specific as an test specification
test then third is called as a out of sample
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prediction test out of sample prediction test.
So, that means that means once you have estimated
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models. So, next step is model reliability
so model reliability deals with 3 tests so
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test 1, test 2, and test 3; so, test 1 deals
with goodness of fit; test 2 deals with specification
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test; and test 3 deals with out of sample
prediction test.
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So, now once you go through all these test
so we had two different answers yes and no
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yes and no then again yes and no alright now
if it is every case if it is no then then
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we have to proceed further we have to proceed
further to step called as a you can go to
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step 2 so that means if the mod estimated
modal is not reliable we have to go back to
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step 2 that is what is called as a mathematical
form of the models.
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So, now the mathematical form of the model
again transfer into statistical form of the
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model and again that is to be verified through
available information then again you have
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to process it, get this estimated model then
again you have to go for reliability check
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again you have to continue with yes no situation
then if again know you have to go back to
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again step 2. However, if it is yes if it
is yes then you have to proceed to step 7
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so every times if it is yes, yes, yes then
you have to go for step 7 you have to go to
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step 7.
So now the question is what is step sevens
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so let me explain here what is what is step
7
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Here now the model step 6 here step 6 this
is model reliability model reliability now
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this is this is test 1 this is test 2 this
is test 3 this is nothing but, goodness of
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fit test this is nothing but, specification
test and this is out of sample prediction
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test so obliviously it is no situation yes
situation obviously it is no situation and
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yes situation obviously it is no situation
and yes situation.
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So, now you have a in every test gives no,
no, no then obviously you have to go to step
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6 this step 2 now if it is a yes, if it is
yes, if it is yes ok so then you have to go
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for step 7 now this will be give you step
7 power view .
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So, what is step 7? Now step 7 is basically
deal with a interpretations interpretation
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of the existing estimated models now once
you interpret then next step give to proceed
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for hypothesis testing hypothesis hypothesis
testings hypothesis testings right this is
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a ste 8 step 8 information is a hypothesis
testings now this is for we have to derive
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from you can say specification test ok.
So, now so per as a interpretation is concerned
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we have to go for hypothesis testings then
we have to move to step 9 step 9 step 9 is
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a nothing but, forecasting step 9 is nothing
but, forecasting now this forecasting for
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casting has to be go to step 10.
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So, now this step 10 process is go for future
future development future development which
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is otherwise called as a policy use. This
is what the complete process of econometric
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structures so basically econometric structures
starts with existing theory within that theory
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we have to find out the problem that problem
has to transfer into mathematical form of
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the models; then mathematical form of the
model has to be transfer to statistical form
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of the model then our objective based to investigate
that theory to proper econometric tools.
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So, now to verify that theory or to apply
that econometric model or that problems so
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we need to we need informations now once you
have information you get the estimated models
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now that estimated model has to be checked
that is nothing but, a reliability cal part
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so reliability part is basically a three specifications
that is three different tests so one is called
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as a goodness of a fit test specification
test then out of sample prediction test.
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So, now every test will give yes no results
now if it is a no answer is no then we have
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to go to step 2 again so that is nothing but,
mathematical form of the model again this
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system will continue like statistical form
of the model data then estimated model then
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again you have to go for reliability check
so again you you have an search yes no so
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if it is again then again you have to step
2.
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So, now if it is yes then you have to interpret
the estimated models so the moment will interpreted
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esti estimated model so you have to go for
hypothesis testing which which we have basically
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derive through existing statement or problems
what is all about hypothesis hypothesis basically
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checkmate which is a not verified which has
to be verified so that means for verification
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we need to have a information we have tools
then you have to process it have the estimated
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model then you have to go for testing.
So, now the moment you have a test the results
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then you can apply that model for forecasting
so that means if the estimated model is a
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reliable then obviously a it has to be gone
through testing a hypothesis now if the hypothesis
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testing is a you can say feasible one or it
is you can say considerable one then obviously
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we have consider that model for forecasting.
So, now once you have forecasting then it
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will be give you the direction or for future
development so that means that model can be
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utilized for any policy per policy use. So,
this is what the complete structure of you
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can say econometric model. Let me let me a
explain the details with a very beautiful
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examples let us take case of it is take case
study.
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So, now the case study is a museum the museum
which is running in loss the museum is a running
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in loss; and here assignment is to transfer
this loss making unit to profit making unit
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so this is the typical problem which we have
receives from from a particular department.
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So, now the problem is very clear here is
the museum which is running in loss here assignment
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is to transfer this loss making unit into
profit making unit alright. Now how to do
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that? There are several setups or structure
which we can transfer this loss making unit
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profits profit making unit but, here our agenda
is whether econometric model can be use to
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transfer this loss making unit to profit making
unit. If you ask me question obviously the
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answer is very much yes.
So, now the question is how? Before we apply
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econometric model to this particular problem
let us first go through the existing setup
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or theory what is all about this problem the
problem is that for any particular business
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this status of business difference of one
its low profit and loss account so this status
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of particular business difference upon profit
and loss account alright.
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So, now profit and loss usually represents
the indicator of or performance of a business
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so in business environment profit is a represented
as the component called as a pi so pi is the
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value which can determine the position of
the business so whether it is profit step
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or loss steps this pi has a three different
structures one is called as a pi greater than
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0, pi less than 0, equal to 0 and pi less
than 0. Now if I greater than 0 this business
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store is called as a super normal profit ok.
So, now if pi equal to 0 it will give indication
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normal profit it will give indication to normal
profit. if it is less than 0 it will give
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indication to loss. Now so, what is super
normal profit what is normal profit and what
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is loss.
So. let me a first highlight what is a pi
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pi is the profit function which basically
difference upon two components one is called
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as a r component another is called as a c
component; r represents revenue and c represent
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cost so that means the problem is a very clear
here we like to know what is this step of
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this particular business the step of particular
business depends upon profit function and
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profit of a particular business unit difference
upon it is earnings which we call it revenue
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and its cost which equality expenditures.
So, now the different betweens earnings and
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expenditure will give you the step of the
business now once I do have a revenue another
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side we have cost now the difference will
give you indication about the size of profit
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are minus c so r minus c will give you indication
about the step of the profit.
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So, now if will as super number profit then
it is nothing but, r minus c, r minus c should
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be greater than 0 now for normal profit the
structure of r minus c must be equal to 0
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and a for for this loss situation this r minus
c must be less than 0. Now if r minus c greater
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than 0 so it is an indication that r should
be greater than c now if r minus c less equal
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to 0 then it is nothing but, r equal to c.
So, now for this it is an indication of r
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must be less than c alright now the question
is what is r r is basically r is basically
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revenue and it depends upon it depends upon
two components price component and quantity
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components; that means p represents price
of this business or product then q represents
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quantity of this particular business so this
is the entire structure of you can say profit
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and loss account of this particular business
accounts.
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So, now for this particular problem now for
this particular problems we are in the position
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of pi less than 0. Now when we see the loss
making organization or loss making business
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then obviously y is less than 0 so that means
the existing problem that means the existing
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problem is pi less than 0 but, our assignment
is two transfer this existing problem in to
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profits f.
So, that means we need to transfer pi should
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be greater than equal to 0 pi should be greater
than to 0 that means so what is pi here is
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now pi greater than 0 means we must have a
revenue and we must have cost that means the
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transformation rule should be r greater than
equal to c.
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So, now how to do that so we need to have
pi so that means if I will put it in mathematical
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for than obviously pi is function of r and
c so that is nothing but, r minus c now we
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have three different strategy all together
so what is the strategy so strategy 1 now
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strategy 1 pi can increase means pi increase
depends upon various strategy strategy 1 first
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r will increase provided c remain constant
then strategy 2 r can be constant provided
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c must be decrease ok.
So, now strategy three here r can be increase
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in the same time c can b also increase but,
r increase must be greater than to c increase
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so we have three different strategy all together
to transfer loss making unit two profit making
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unit now the first strategy is very effective
in the short run short run in the short run
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but, strategy 2 strategy strategy three is
the long run in part ok.
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So, now in the mean times for this particular
problem we have to take one strategy let us
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start with a strategy 1 what is strategy 1
strategy 1 is a pi as to be increase provided
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r has to be increase and c has to be constant
now what is all about r increased so r increase
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means it is the question of p and q moment
because revenue is a function of price and
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quantity price and quantity now how to do
that because I will come come here again.
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Now, this R R depends upon price and quantity
so now how to that so now again we have three
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different strategy again we have three different
strategy in fact first strategy strategy 1
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p increase q q as usual remain constant; strategy
2 p decrease or as usual q is an normal then;
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strategy strategy 3 p remain constant but,
if we remain constant then q remain constant
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so that means strategy three cannot be possible
however first strategy and second strategy
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can be very effective tool for solving this
particular issue.
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So, now whether you will go for price increase
or price decrease because price increase and
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quantity increase cannot be go simultaneously
because the if will go by you can say market
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principals then obviously the structure is
something different for instants so the structure
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is a revenue equal to price into quantity
but, you know if will go by market model then
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q equal to function of price ok.
So, that means it is the p which influence
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q so that means here whatever items we have
mention here they remains silent its increase
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decrease difference upon the moment of p p
increase p decrease now whether will go for
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p increase and p decrease it has to be certain
procedure it has to be certain procedures
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now whether you have to go for p increase
or p decrease so we have to proceed further
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for it is a you can say structures.
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So, now for loss making organization loss
making to profit making organizations so we
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have to use revenue increase strategy where
cost remain constant and within the revenue
200
00:27:34,659 --> 00:27:41,659
increase strategy we have p increase strategy
and p decrease strategy so obviously q I will
201
00:27:42,719 --> 00:27:47,679
change accordingly obviously q I will change
accordingly now whether you will go for p
202
00:27:47,679 --> 00:27:54,679
increase or p decrease now it difference upon
the concept called as a if the price elasticity
203
00:27:54,700 --> 00:28:01,700
which is usually derive through market models
market models so that is by theory usually
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00:28:02,909 --> 00:28:09,059
place fantastic rules so in the elder concept
I have mentioned revenue equal to price into
205
00:28:09,059 --> 00:28:15,219
quantity and the difference the difference
of revenue minus cost will you give you the
206
00:28:15,219 --> 00:28:20,590
profit structure this is the complete market
model and which we have derive from the existing
207
00:28:20,590 --> 00:28:25,219
information or theory.
So, now to transfer this loss making unit
208
00:28:25,219 --> 00:28:31,539
to profit making unit then obviously we have
certain procedures or you can structures so
209
00:28:31,539 --> 00:28:36,889
that we have to follow and apply accordingly
the business strategy can be you can say a
210
00:28:36,889 --> 00:28:43,889
implemented now what is all about this a you
can say a price elasticity now price elasticity
211
00:28:48,479 --> 00:28:52,789
basically let me explain here price elasticity.
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00:28:52,789 --> 00:28:59,789
So, price elasticity basically here difference
upon two things if we greater than one and
213
00:29:02,789 --> 00:29:09,669
if we less than one alright. Now before I
explain this concept if we greater than one
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00:29:09,669 --> 00:29:15,519
and if we less than one let me high let one
thing here what is all about price elasticity
215
00:29:15,519 --> 00:29:22,519
price elasticity represent the degree of responsiveness
of change in quantity with respect to its
216
00:29:23,759 --> 00:29:30,759
determinants and price is one of the determinant
of this problems now the moment of price will
217
00:29:32,149 --> 00:29:39,149
affect the moment of quantity now so we have
to target price then obviously quntil quantity
218
00:29:39,330 --> 00:29:44,649
will be quantity will be get affected.
So, now what we have to do here so the moment
219
00:29:44,649 --> 00:29:50,289
when if we greater than one then the structure
of the relationship between pri if we means
220
00:29:50,289 --> 00:29:55,429
it is the relationship between price and quantity
keeping other things remain constant now this
221
00:29:55,429 --> 00:30:02,429
idea will measure quantity in this side a
I will measure price then obviously the existing
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00:30:02,639 --> 00:30:06,830
setup with respect e p greater than one is
like this alright.
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00:30:06,830 --> 00:30:13,830
So, now this is called as a market demand
curve and another set when e p less than one
224
00:30:14,239 --> 00:30:19,899
this structure of demand curve is a like this
this is also market demand curve this is for
225
00:30:19,899 --> 00:30:25,859
e p greater than one this is for a e p less
than one it is derive through again the existing
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00:30:25,859 --> 00:30:32,859
theory that is market informations.
So, now oh now we have to see what is the
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00:30:33,909 --> 00:30:40,909
safe and structure of price and quantity now
let us take a case here is this is the position
228
00:30:41,809 --> 00:30:48,809
original position say p p 1 and this is q
1 alright now we have to take here also one
229
00:30:51,479 --> 00:30:57,539
one situation then this is p 1 this is q 1
and corresponding revenue is a r 1 so r 1
230
00:30:57,539 --> 00:31:04,539
is a nothing but, p 1 into q 1 alright.
So, now the moment you will get r 2 one so
231
00:31:06,549 --> 00:31:12,019
this is the existing current situation of
revenue which is noth which is multiplied
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00:31:12,019 --> 00:31:19,019
by price into quantity now I will make a change
one increase price and another decrease price
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00:31:20,960 --> 00:31:27,960
now this is p 2 and this is p 3 corresponding
p 2 the quantity information is q 2 revenue
234
00:31:30,690 --> 00:31:37,690
information is r 2 then corresponding p 3
quantity information q 3 and revenue information
235
00:31:38,159 --> 00:31:43,549
is r 3 alright.
So, now the structure is like this way so
236
00:31:43,549 --> 00:31:50,549
this is what the existing structure so structure
original position then increasing situation
237
00:31:54,259 --> 00:32:01,259
and decreasing situation this is price component
this is quantity component so original position
238
00:32:02,159 --> 00:32:09,159
is p 1 then p 2 then p 3 and quantity information
is q 1 q 2 and q 3 alright.
239
00:32:12,739 --> 00:32:19,739
So, now if will make a comparative analysis
the corresponding revenue is a corresponding
240
00:32:20,759 --> 00:32:27,759
revenue is a p 1 q 1 p 2 q 2 and p 3 q 3 which
will quality r 1 which will quality r 2 which
241
00:32:31,859 --> 00:32:38,859
is quality r 3. Now if will make a look here
is then obviously the conclusion is that if
242
00:32:41,309 --> 00:32:47,039
will order it properly with respect to ascending
and descending then obviously r 3 is the greater
243
00:32:47,039 --> 00:32:52,960
than to r 2 greater than two r 1 alright.
So, now you come down to this particular component
244
00:32:52,960 --> 00:32:59,960
against now here if will increase price then
the quantity decrease accordingly so this
245
00:33:01,999 --> 00:33:08,999
is p 2 this is q 2 now again you go for price
decrease so this is p 3 and q 3 now this is
246
00:33:13,519 --> 00:33:20,519
r 2 this is r 3 and this is r one.
So, now you make a look here this side and
247
00:33:22,960 --> 00:33:29,960
this sides here a small increase of price
will decrease the quantity very low rate again
248
00:33:33,379 --> 00:33:40,249
if will decrease the price it increase quantity
at a larger what in this particular situation
249
00:33:40,249 --> 00:33:46,629
if will go for high increase your price then
the a decrease quantity very less what it
250
00:33:46,629 --> 00:33:52,460
will decrease price then increase quantities
you also very less so that means so here the
251
00:33:52,460 --> 00:33:59,059
structure is that if will go by same strategy
then this sequence will be yes r 2 greater
252
00:33:59,059 --> 00:34:06,059
than r 1 greater than r 3 so that means when
if we greater than one then we come down to
253
00:34:07,859 --> 00:34:14,859
now strategy now you come down to strategy
for if we greater than one then to get r more
254
00:34:17,099 --> 00:34:24,099
you need to have p decrease policy now for
if we less than one you need to have policy
255
00:34:28,290 --> 00:34:35,290
for r increase a you must have a p decrease
policy if we decrease policy.
256
00:34:35,840 --> 00:34:42,840
So, now what you to do so for this existing
problem so we have to check whether if we
257
00:34:44,090 --> 00:34:50,810
greater than one or if we less than one if
we greater than one then our assignment to
258
00:34:50,810 --> 00:34:57,810
transfer loss making to profit making we need
to have we increase policy but, if your situation
259
00:34:58,570 --> 00:35:04,590
is e p less than one in two transfer this
loss making to profit making organized unit
260
00:35:04,590 --> 00:35:11,590
you have to go for price increase so price
easier tool here to transfer this loss making
261
00:35:12,700 --> 00:35:19,700
organization to profit making organization.
So, now in order to go; in order to decide
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00:35:20,020 --> 00:35:25,510
whether you have to go for price increase
or you have to go for price decrease so elasticity
263
00:35:25,510 --> 00:35:30,910
demand or priceless demand pressure fantastic
rules so the pricelist demand basically elastic
264
00:35:30,910 --> 00:35:37,910
in nature or in elastic in nature if it is
elastic then obviously the value of if we
265
00:35:46,820 --> 00:35:52,200
greater than two one if price is in annalistic
then the value of p must be less than one.
266
00:35:52,200 --> 00:35:59,200
So, now when if you greater than one then
obviously decrease price is the best solution
267
00:35:59,520 --> 00:36:06,520
to have more and more revenue now if we less
than one an obviously the price increase will
268
00:36:08,440 --> 00:36:15,440
have more and more revenue now according to
this situation we have to apply price increase
269
00:36:18,250 --> 00:36:24,580
policy and price decrease policy ultimately
it will increase the the revenue component
270
00:36:24,580 --> 00:36:30,480
the moment it will be increase the revenue
component then profit can be incase subsequent
271
00:36:30,480 --> 00:36:35,860
because we have applied the strategy where
c remain constant.
272
00:36:35,860 --> 00:36:42,860
So, now having c remain constant then you
have to fine how do the situation how price
273
00:36:43,100 --> 00:36:50,100
increase can be a applied or price decrease
can be applied to transfer this loss making
274
00:36:50,770 --> 00:36:53,350
unit two profit making a unit.
275
00:36:53,350 --> 00:37:00,350
now the interest thing is interesting thing
is the price elasticity component now what
276
00:37:00,550 --> 00:37:06,800
whatever concept to have discussed still now
this all about business funda so that means
277
00:37:06,800 --> 00:37:12,380
we have identify the problem the problem is
that it is loss making unit and we have to
278
00:37:12,380 --> 00:37:16,830
transfer into profit making you have this
is this in full problem there is straight
279
00:37:16,830 --> 00:37:22,570
forward but, how to do that so for that we
need a need to have a complete information
280
00:37:22,570 --> 00:37:28,770
that is nothing but, the market information
the problem information the existing theory
281
00:37:28,770 --> 00:37:35,770
existing setup.
So, what we have done so we just collect the
282
00:37:35,910 --> 00:37:40,590
information so what is all about this loss
and profit funda so the loss profit funda
283
00:37:40,590 --> 00:37:47,590
depends upon the pivello which depends upon
revenue cost structures now pi can be increase
284
00:37:49,960 --> 00:37:56,010
depending upon moment of r and c since it
is loss making organization then obviously
285
00:37:56,010 --> 00:38:03,010
r is less than to c so our task is to have
more are with respect to c so for that we
286
00:38:04,980 --> 00:38:11,760
have to know the price and quantity structures.
So, now there is simp principal very simples
287
00:38:11,760 --> 00:38:18,760
because r depends upon p and q but, p q has
a mathematical relationship because we have
288
00:38:20,500 --> 00:38:27,500
a market theory so the relationship between
p q depends upon the structures so the relationship
289
00:38:28,100 --> 00:38:35,100
between p and q is a like this so every time
this q is a function of function of p so that
290
00:38:35,220 --> 00:38:42,220
means to have to have more and more revenue
so p has to be instrumental.
291
00:38:42,780 --> 00:38:49,780
So, now either p can increase or p can decrease
depending upon the situation of price elasticity
292
00:38:50,770 --> 00:38:56,260
now the question is what is all about this
price elasticity I have already explain the
293
00:38:56,260 --> 00:39:01,410
physical interpretation it is simply represented
as the degree of responsibilities of change
294
00:39:01,410 --> 00:39:04,610
in quantity demand with respect to it is a
price.
295
00:39:04,610 --> 00:39:11,610
So, now if value put it in mathematical not
then it is nothing but, p by q d q by d p
296
00:39:13,600 --> 00:39:20,600
now this is what we call its simply mathematics
now how to get this value here is how to get
297
00:39:23,340 --> 00:39:28,630
this value whether e p greater than one or
e p less than one theoretical we explain if
298
00:39:28,630 --> 00:39:35,540
it is e p greater than one what is the situation
what should be done and e p is less than one
299
00:39:35,540 --> 00:39:42,540
what is this situation and what is two be
done but, the question is how to now whether
300
00:39:43,150 --> 00:39:48,580
if we greater than one or if we less than
one further we have to again go for this existing
301
00:39:48,580 --> 00:39:52,520
market theory.
So, market information or market module will
302
00:39:52,520 --> 00:39:58,530
give you information about the price elasticity
now depending upon the calculated will b p
303
00:39:58,530 --> 00:40:05,530
we can get a conclusion or we can get a solutions
for this particular problem now the existing
304
00:40:05,770 --> 00:40:11,230
theory is that q is every time function of
p but, it is in implicitly format if will
305
00:40:11,230 --> 00:40:18,230
put it implicitly format an q is not thing
what represented as a it is nothing but, function
306
00:40:19,730 --> 00:40:24,150
of of p and which is nothing but, a minus
b p say ok.
307
00:40:24,150 --> 00:40:29,770
So, p is every time positive q is a every
time positive because of price of price of
308
00:40:29,770 --> 00:40:34,600
particular product cannot be 0 cannot be negative
so quantity of particular product cannot be
309
00:40:34,600 --> 00:40:40,790
0 cannot be negative if it is 0 that means
there is no business at all so obviously price
310
00:40:40,790 --> 00:40:46,480
must be positive quantity must be positive
now with this particular equation q equal
311
00:40:46,480 --> 00:40:53,480
to a minus b p so there are two indicators
here a and b so this are called as a parameters
312
00:40:54,680 --> 00:41:01,680
this here called as a parameters a b r parameters
and q p r price and quantity.
313
00:41:02,970 --> 00:41:09,970
So, now for this particular problem you most
have you most have q information and we must
314
00:41:12,980 --> 00:41:19,980
have a p informations but, u may not have
a information u may not have a b information
315
00:41:21,660 --> 00:41:28,660
now econometric modelling place a rule here
it it place base very very classic rule.
316
00:41:28,950 --> 00:41:35,950
So, what is that no here econometric model
is employed to know the value of this two
317
00:41:36,920 --> 00:41:43,920
parameters that it is a and b so that means
once you get to know what is a and what is
318
00:41:44,940 --> 00:41:51,010
b then you can get to know what is the value
of e p m d because the adjusting problem will
319
00:41:51,010 --> 00:41:58,010
give information like this for every p there
is q for instants a p g one p g two p g three
320
00:41:58,650 --> 00:42:04,580
p four p five p six then corresponding p now
obviously you must have a q information you
321
00:42:04,580 --> 00:42:09,470
have q information you have q information
you have q information you have q information
322
00:42:09,470 --> 00:42:15,380
and you have q information.
So, now corresponding p you have q information
323
00:42:15,380 --> 00:42:22,380
now so p is their q is their but, a minus
b p is not with you so we have to past now
324
00:42:23,690 --> 00:42:30,690
what is a value what is b value for instants
if lets a p equal to one then you cannot get
325
00:42:32,300 --> 00:42:39,300
q because we have no idea about a and b so
if I derived the equation so q equal to thirty
326
00:42:41,040 --> 00:42:47,470
minus twenty we then obviously if v equal
to one then can able to calculate q q if we
327
00:42:47,470 --> 00:42:50,290
equal to to you can able to calculate the
value of q.
328
00:42:50,290 --> 00:42:57,290
So, now the question is what is a a and what
is b for this equation a can be thirty and
329
00:42:57,590 --> 00:43:04,590
b can be twenty what you cannot arbitrary
this value thirty and twenty it has to be
330
00:43:08,180 --> 00:43:14,310
obtained certain process and stationed structure
and to have that accurate value of a and b
331
00:43:14,310 --> 00:43:21,310
econometric model is means usually play place
verify very very fantastic rules.
332
00:43:21,720 --> 00:43:28,720
So, now how econometric modelling you can
say very beautiful for this existing situation
333
00:43:29,350 --> 00:43:35,100
what you remember one thing whatever we have
discussed you will now it is all about the
334
00:43:35,100 --> 00:43:41,060
bivariate frame work of this econometric modelling
because every time we are handling q and p
335
00:43:41,060 --> 00:43:48,060
what the game is very interesting when you
will go for multivariate models what is all
336
00:43:48,060 --> 00:43:54,230
about this multivariate model in that case
the q may not be function of p only it can
337
00:43:54,230 --> 00:43:58,040
be something else for instance like this.
338
00:43:58,040 --> 00:44:05,040
So q q is a function of p only now q can be
function of so many other for other components
339
00:44:07,510 --> 00:44:13,220
p advertising of that particular product or
you can say for this museum museum problem
340
00:44:13,220 --> 00:44:18,680
you people have a no idea about that museum
then people may not compared because museum
341
00:44:18,680 --> 00:44:25,680
business depends upon how many costumers entering
to that museum so obviously you need to a
342
00:44:26,320 --> 00:44:32,200
you can say awareness so you to create a awareness
among the people so that is y advertisement
343
00:44:32,200 --> 00:44:37,680
place a fantastic rules population of that
c t also another effector which can influence
344
00:44:37,680 --> 00:44:44,040
the quantity effector then policy of that
particular area also for instants if there
345
00:44:44,040 --> 00:44:49,000
is a earthquake policy for there is some external
factor like terrorist attack or something
346
00:44:49,000 --> 00:44:55,480
else then obviously that effector also have
a impact on quantity for instants take a case
347
00:44:55,480 --> 00:45:01,820
of you can say north east states like you
can say Asam, Arunachal pradesh etcetera.
348
00:45:01,820 --> 00:45:08,010
And you take another case Jammu and Kashmir.
So, the it tourist particular place depends
349
00:45:08,010 --> 00:45:13,200
upon the a economic environment their business
environment their political environment their
350
00:45:13,200 --> 00:45:18,910
if this factors are not stable not positive
or you can say you not in a positive set an
351
00:45:18,910 --> 00:45:25,170
obviously a the quantity of the means the
costumer to that tourist area will be very
352
00:45:25,170 --> 00:45:28,820
less.
So, only the pricing of that particular product
353
00:45:28,820 --> 00:45:35,820
or particular based may not be a one criteria
but, it depends upon so many other criteria
354
00:45:36,370 --> 00:45:41,890
that means when will go for long run strategy
transfer this loss making unit to profit making
355
00:45:41,890 --> 00:45:48,890
unit then obviously you have to apply multivariate
models but, we have to start with the first
356
00:45:49,600 --> 00:45:56,600
bivariate then you will integrate with the
multivariate models alright ok.
357
00:45:59,160 --> 00:46:06,160
So, now now I will explain what is all the
what is all about this a multivariate framework
358
00:46:07,680 --> 00:46:13,280
and bivariate frame work but, before before
I proceed to explain that component let me
359
00:46:13,280 --> 00:46:20,280
explain one more here here when will go for
for that particular problem when it we greater
360
00:46:20,320 --> 00:46:27,320
than one and when if we less than one if we
less than one then obviously this structure
361
00:46:27,350 --> 00:46:33,660
is like this and this structure is like this.
So, now let say this is the original position
362
00:46:33,660 --> 00:46:38,630
this is the original position now you are
targeting something or you are applying some
363
00:46:38,630 --> 00:46:45,630
strategy so that the step of this industry
can be transfer into some difference step
364
00:46:46,700 --> 00:46:53,290
like say profit itself now for that need to
go for price increase or you can say price
365
00:46:53,290 --> 00:46:58,640
decrease but, one thing you remember here
so we are moving in this particular corner
366
00:46:58,640 --> 00:47:01,060
only.
So, that means only price which can influence
367
00:47:01,060 --> 00:47:08,060
this quantity but, this is nothing but, simply
this is p p you can say q 1 this is q 2 this
368
00:47:08,110 --> 00:47:14,180
is q 3 this is p 1 this is p 2 this is p 3
but, when will apply a this is very correct
369
00:47:14,180 --> 00:47:20,330
when we will apply q simply as a function
of p only but, when you apply q is a function
370
00:47:20,330 --> 00:47:26,520
of other factor then obviously here profit
of that particular business depends upon the
371
00:47:26,520 --> 00:47:32,390
moment of this particular curve market demand
curve so that will a increase to this sides
372
00:47:32,390 --> 00:47:36,600
ok.
So, this side also increase to this side so
373
00:47:36,600 --> 00:47:43,490
obviously this as an large impart on this
organization so the loss making concept or
374
00:47:43,490 --> 00:47:50,490
organization can be transfer into profit making
organization alright so before I go to explain
375
00:47:51,370 --> 00:47:58,370
detail about econometric modelling let me
explain the entire structure of the that analysis
376
00:47:58,660 --> 00:47:59,800
ok.
377
00:47:59,800 --> 00:48:06,800
The structure of data analysis because I have
already discussed what is the standard structure
378
00:48:12,350 --> 00:48:18,390
of the you can say econometric modeling? So,
this standard procedure is a you have to start
379
00:48:18,390 --> 00:48:24,620
with the theory then you identify the problem
transpose the problem into mathematical form
380
00:48:24,620 --> 00:48:30,170
then statistical form you must have information
you process the information by applying some
381
00:48:30,170 --> 00:48:34,730
tools and technique then you get estimated
model after having the estimated model you
382
00:48:34,730 --> 00:48:40,970
have to go for reliability check if the reliability
estimated model is a reliable one then you
383
00:48:40,970 --> 00:48:47,970
have to go for you can say into you have to
interpret that model go for hypothesis testing
384
00:48:48,320 --> 00:48:52,940
forecasting then its future you future you
can policy use.
385
00:48:52,940 --> 00:48:59,940
So, now the issue is what is the entire structure
of econometric modeling? The structure of
386
00:49:01,940 --> 00:49:06,690
econometric modelling is a part and personal
of you can statistical modeling so statistical
387
00:49:06,690 --> 00:49:10,610
modeling again is a vast concept and econometric
modelling is part of that.
388
00:49:10,610 --> 00:49:15,880
So, now I will highlight here first what is
the entire structure of statistical modeling;
389
00:49:15,880 --> 00:49:20,030
then will being the concept of structure of
econometric modeling.
390
00:49:20,030 --> 00:49:27,030
So, data analysis basically divided into three
parts data analysis basically divided into
391
00:49:27,390 --> 00:49:34,390
three parts first part is called as a univariate
data modelling univariate data modelling then
392
00:49:40,880 --> 00:49:47,880
bivariate data modelling then multivariate
multivariate data modelling ok.
393
00:49:57,340 --> 00:50:04,340
So, we have univariate data modeling, we have
bivariate data modelling and we have multivariate
394
00:50:07,030 --> 00:50:14,030
data modeling ok. Now what is univariate modeling?
what is bivariate modeling? And what is multivariate
395
00:50:20,010 --> 00:50:26,160
modeling?
Univariate modelling means to design the problem
396
00:50:26,160 --> 00:50:30,330
means structure of a particular variable at
a time.
397
00:50:30,330 --> 00:50:37,330
So, now here game boundaries very very simple
and very easy because its only one variable
398
00:50:40,950 --> 00:50:47,950
which can give you the indication and strategy
that is what forecasting strategy so with
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00:50:48,980 --> 00:50:54,100
one variable we have to play the game so this
is what it is called as a univariate data
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00:50:54,100 --> 00:50:59,770
modeling.
Bivariate data modelling is basically it it
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00:50:59,770 --> 00:51:06,770
is basically two variables games.
So, that means only two variables can explain
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00:51:06,770 --> 00:51:13,120
as the entire structure so that means how
one variable will affect the other variable
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00:51:13,120 --> 00:51:18,420
and other variable will affect the first variable
so multivariable multivariate data modelling
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00:51:18,420 --> 00:51:25,420
is the complete structure of or you can say
simultaneous simultaneous structure of all
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00:51:26,340 --> 00:51:32,750
this variables together that means let me
take it guess here is this is the this is
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00:51:32,750 --> 00:51:39,750
the boundary here is so we have several variable
say x 1 x 2 x 3 x 4 x 5 and x 6 alright.
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00:51:41,800 --> 00:51:48,800
So, now what have to do now if I am concerned
about only the e structure of x 1 or x 2 x
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00:51:50,440 --> 00:51:57,440
3 x 4 like this then it is called as a univariate
data analysis now if I discuss about to the
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00:51:57,620 --> 00:52:04,620
relationship between x 1 and x 2 or x 1 and
x 2 then it is called as bivariate modelling.
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00:52:05,420 --> 00:52:12,420
So, now if I will target x 1 x 2 x 3 x 4 x
5 x 6 all together it is all about called
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00:52:14,480 --> 00:52:19,920
as a multivariate data modeling. Now there
are various techniques available unders univariate
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00:52:19,920 --> 00:52:25,730
data modelling various techniques available
under bivariate data modelling and variable
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00:52:25,730 --> 00:52:31,940
various techniques are available under multivariate
data modelling under biva under univariate
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00:52:31,940 --> 00:52:38,940
data modelling is standard techniques are
central tendency, dispersion and skewness
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00:52:39,050 --> 00:52:45,120
under bivariate data modelling the standard
techniques here covariance, correlation and
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00:52:45,120 --> 00:52:52,120
regression and under multivariate data modelling
it is a very huge component and it covers
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00:52:52,890 --> 00:52:59,890
number of techniques as starting from multiple
correlation, multiple regression, vector analysis,
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00:53:00,700 --> 00:53:07,700
cluster analysis, disjointed analysis, conjoint
analysis, discriminate analysis, path analysis,
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00:53:08,670 --> 00:53:15,670
structural equation modelling and simultaneous
equation systems so these are the complete
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00:53:16,290 --> 00:53:23,290
setup of data analysis that is with respect
to univariate model, bivariate models and
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00:53:23,750 --> 00:53:30,430
multivariate models.
So, now this is what it is called as a the
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00:53:30,430 --> 00:53:37,430
complete frame work of statistical modelling
however we are not in a position to discuss
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00:53:37,710 --> 00:53:44,710
the entire structure of multivariate data
modelling so econometric modelling is a basically
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00:53:46,610 --> 00:53:53,610
in between bivariate modelling to multivariate
modelling in this particular course we are
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00:53:54,390 --> 00:54:00,470
basically interested for two things that is
regression modelling and time series modelling.
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00:54:00,470 --> 00:54:07,350
So, we have to go through various components
under regression modelling like bivariate
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00:54:07,350 --> 00:54:13,390
modeling, tri variate modeling, multivariate
modelling and it is various problems and do
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00:54:13,390 --> 00:54:17,210
not time series modelling we have to go for
auto regressive scheme distributed scheme
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00:54:17,210 --> 00:54:24,210
haringa model, arch model, garch model, bar
model. So, and other problems now for regression
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00:54:26,390 --> 00:54:30,750
modelling and time series modelling we have
to go through series our components and it
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00:54:30,750 --> 00:54:37,240
is a problem setup so will discussed detailed
when will go for this you can say econometric
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00:54:37,240 --> 00:54:42,840
modelling in detail in the next class with
this we can conclude the session thank you
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00:54:42,840 --> 00:54:49,840
very much have
a nice day.