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Econ 550 Chapter 5

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Submitted By thepoet1968
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Week 3
Chapter 5: Exercises 1, 5, 6, and 9

1. Prizer Corporation sales of snowmobiles: a. S = k(YZ)/P = 100(11,000 1200)/20,000 = 66,000 b. S = 100(11,000 1200)/17,500 = 75,429. Sales revenue rises. In general, when price falls and total revenue rises, we learn the snowmobiles are elastic.

c. Obtain time series data on S, Y, Z and P and use regression techniques to estimate k. One way to do this is to use a double log style, as in Log S = log k + log Y + log X – log P. The intercept is log k. To find the anti-log of it, use the exponential, elog k. d. Sales in period t+1 are a function of variables whose values are unknown prior to period t+1. Therefore, before one could estimate St, one would first have also to estimate Yt, Zt, and Pt. 5. Forecasting with smoothing methods: a. We can fill in the moving averages. For this problem, the column headed as 5-Year Moving Average is the actual annual figure, and your job is to forecast 2010 for that column and all the other empty columns. The bold and underscored numbers fill in the table on the next page. Year | Actual Demand | 3-year MA | 3-year MA | Ex Smooth | Ex Smooth | | | | | W = .9 | W= .3 | 2000 | 800 | xxxx | xxxx | xxxx | xxxx | 2001 | 925 | xxxx | xxxx | 800 | 800 | 2002 | 900 | xxxx | xxxx | 912.50 | 837.50 | 2003 | 1025 | xxxx | 900 | 901.25 | 856.25 | 2004 | 1150 | xxxx | 1025 | 1012.63 | 906.88 | 2005 | 1160 | 1025 | 1150 | 1136.26 | 979.81 | 2006 | 1200 | 1112 | 1160 | 1157.63 | 1033.87 | 2007 | 1150 | 1170 | 1200 | 1195.76 | 1083.71 | 2008 | 1270 | 1170 | 1150 | 1154.58 | 1103.60 | 2009 | 1290 | 1207 | 1270 | 1258.46 | 1153.52 | 2010 | 1214 | 1237 | 1290 | 1286.85 | 1194.46 | MSE | 19015.2 | 25748.6 | 18680.0 | 17974.8 | 110856.1 | RMSE | 137.9 | 160.5 | 136.7 | 134.1 |

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