Chapter: Managerial Economics - Applications, Strategies, and Tactics
Eco550 Week 3
Chapter 5 1. The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000
a) what value would you predict for S?
Answer:
The given function is S=K*YZ/P at the given values of; k=100 Y=$11,000 Z=$1,200 P=$20,000 the value of S is: S=100(11000*1200)/20000= $66,000 so there would be a sales of $66,000 at above given values. 5. A firm experienced the demand shown in the following table.
a. Fill in the table by preparing forecasts based on a five-year moving average, a three-year moving average, and exponential smoothing (with a w = 0.9 and a w = 0.3). The exponential smoothing forecasts may be begun by assuming Ŷt+1 = Yt. b. Using the forecasts from 2005 through 2009, compare the accuracy of each of the forecasting methods based on the RMSE criterion. c. Which forecast would you have used for 2010? Why?
5- year 3-Year Exponential Exponential Actual Moving Moving Smoothing Smoothing
Year Demand Average Acverage (W= 0.9 ) (W= 0.3 )
2000 800 xxxx xxxx xxxx Xxxx
2001 925 xxxx xxxx 687.5 762.5
2002 900 xxxx Xxxx 947.5 932.5
2003 1025 xxxx 875 787.5 862.5
2004 1150 xxxx 950 912.5 987.5
2005 1160 960 1025 1141 1147
2006 1200 1032 1112 1124 1148
2007 1150 1087 1170 1245 1215
2008 1270 1137 1170 1042 1114
2009 1290 1186 1207 1252 1264
2010 * 1214 1237 Sum 9139 9433
RMSE= 9139/9 =1,015 when W=0.9
RMSE=9433/9
=1,048 When W=0.3
I would choose to use W=9 because it has the least amount of change between the two numbers. We should always use the number with least amount
Chapter 5 1. The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000
a) what value would you predict for S?
Answer:
The given function is S=K*YZ/P at the given values of; k=100 Y=$11,000 Z=$1,200 P=$20,000 the value of S is: S=100(11000*1200)/20000= $66,000 so there would be a sales of $66,000 at above given values. 5. A firm experienced the demand shown in the following table.
a. Fill in the table by preparing forecasts based on a five-year moving average, a three-year moving average, and exponential smoothing (with a w = 0.9 and a w = 0.3). The exponential smoothing forecasts may be begun by assuming Ŷt+1 = Yt. b. Using the forecasts from 2005 through 2009, compare the accuracy of each of the forecasting methods based on the RMSE criterion. c. Which forecast would you have used for 2010? Why?
5- year 3-Year Exponential Exponential Actual Moving Moving Smoothing Smoothing
Year Demand Average Acverage (W= 0.9 ) (W= 0.3 )
2000 800 xxxx xxxx xxxx Xxxx
2001 925 xxxx xxxx 687.5 762.5
2002 900 xxxx Xxxx 947.5 932.5
2003 1025 xxxx 875 787.5 862.5
2004 1150 xxxx 950 912.5 987.5
2005 1160 960 1025 1141 1147
2006 1200 1032 1112 1124 1148
2007 1150 1087 1170 1245 1215
2008 1270 1137 1170 1042 1114
2009 1290 1186 1207 1252 1264
2010 * 1214 1237 Sum 9139 9433
RMSE= 9139/9 =1,015 when W=0.9
RMSE=9433/9
=1,048 When W=0.3
I would choose to use W=9 because it has the least amount of change between the two numbers. We should always use the number with least amount