Question

Jim's department at a local department store has tracked the sales of a product over the last three weeks. Forecast demand using exponential smoothing with an alpha of 0.4, and an initial forecast of 26.4 for period 2. What is the forecast for period 5? Period Demand 1 24 2 23 3 26 4 36

Same data to the previous one: Jim's department at a local department store has tracked the sales of a product over the last three weeks. Forecast demand using exponential smoothing with an alpha of 0.4, and an initial forecast of 26.4.0 for period 2. What is the MAD?

Answer 1

Using exponential smoothing and an alpha of 0.4, we can predict future demand for a product. The MAD is calculated as the average of absolute differences between actual and forecasted demand. Bread's income elasticity of demand determines if it is a normal or inferior good.

Step-by-step explanation:

The subject question relates to predicting demand using the exponential smoothing technique and understanding the concept of elasticity of demand in economics.

To predict demand using exponential smoothing with a smoothing constant (alpha) of 0.4 and an initial forecast of 26.4, you would apply the formula: Forecast for next period = (Alpha * Demand in current period) + ((1 - Alpha) * Previous period's forecast).

For the MAD (Mean Absolute Deviation), you calculate the average of the absolute errors between the actual demand and the forecasted demand.

The income elasticity of demand for bread, given a rise in income and a decrease in quantity consumed, can be computed to decide if bread is a normal or inferior good. Generally, if the elasticity is positive, the good is considered normal, and if it's negative, the good is considered inferior. This can be calculated by the formula: Income Elasticity of Demand = (% change in quantity demanded) / (% change in income).