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Assignment - Demand Estimation and Forecasting

This document discusses demand estimation and forecasting. It includes discussion questions about time series vs cross-sectional data, the meaning and use of R2 in analysis, steps in the t-test and F-test, issues like multicollinearity in regression, and qualitative vs quantitative forecasting methods. It also provides example problems applying concepts like compound growth rates, moving averages, exponential smoothing, and analyzing leading economic indicators for forecasting.

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Ahmed Khan
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46 views5 pages

Assignment - Demand Estimation and Forecasting

This document discusses demand estimation and forecasting. It includes discussion questions about time series vs cross-sectional data, the meaning and use of R2 in analysis, steps in the t-test and F-test, issues like multicollinearity in regression, and qualitative vs quantitative forecasting methods. It also provides example problems applying concepts like compound growth rates, moving averages, exponential smoothing, and analyzing leading economic indicators for forecasting.

Uploaded by

Ahmed Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Demand estimation and forecasting

Demand estimation
Discussion Questions
1. Explain the difference between time series data and cross-sectional data. Provide examples of
each type of data.
2. Briefly explain the meaning of R2. A time series analysis of demand tends to result in a higher R 2
than one using cross-sectional data. Why do you think this is the case?
3. Summarize the steps involved in conducting the t-test. What is the basis for using the “rule of 2”
as a convenient method of evaluating t-ratios?
4. Briefly explain the meaning of the F-test. Why do you think this test is considered to be more
important in multiple regression analysis than it is in simple regression analysis?
5. What is multicollinearity? How can researchers detect this problem? What is the impact of this
problem on the regression estimates? What steps can be taken to deal with this problem?
Problems

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Forecasting
Discussion Questions
1. “The best forecasting method is the one that gives the highest proportion of correct predictions.”
Comment.
2. Enumerate methods of qualitative and quantitative forecasting. What are the major differences
between the two?
3. Discuss the benefits and drawbacks of the following methods of forecasting:
a. Jury of executive opinion
b. The Delphi method
c. Opinion polls
a. Each method has its uses. What are they?
2. Why are manufacturers’ new orders, nondefense capital goods, an appropriate leading indicator?
3. Why is the index of industrial production an appropriate coincident indicator?
4. Why is the average prime rate charged by banks an appropriate lagging indicator?
5. Discuss some of the important criticisms of the forecasting ability of the leading economic
indicators.
6. Manhattan was allegedly purchased from Native Americans in 1626 for $24. If the sellers had
invested this sum at a 6 percent interest rate compounded semi-annually, how much would it
amount to today?
7. The compound growth rate is frequently used to forecast various quantities (sales, profits, and so
on). Do you believe this is a good method? Should any cautions be exercised in making such
projections?
8. Describe projections that use either moving averages or exponential smoothing. Under what
conditions can these techniques be used? Which of the two appears to be the more useful?
9. You have been asked to produce a forecast for your company’s product, bottled water. Discuss
the kind of information you would look for in order to make this forecast.
10. The following are the monthly changes in the index of leading economic indicators during 2001
and January 2002:
Problems

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