5. Using the accelerator model in which the level of inventories in current perioddepends on the expected sales following this equation: Nt= a EStWhere N stands for the current level of inventories, ESt stands for the level of expectedsales and alpha is a parameter equal to 0.6. The growth or increase in inventories isgiven by AN, = B(N₁-N₁-1), where Beta parameter is equal to 0.3a) Suppose that the initial level of inventories is zero and the forecasting for sales forthis period is equal to 200. Can you quantify the level of inventory investment? Whatwould it be total production in period 1?b) Now suppose that in the second period there growth of inventories is 12%. What isthe value of inventory investment for period 2 and forecasting sales for period 2?

Answered: Image /qna-images/answer/bed31398-025c-4c3d-8b80-e343be52485b.jpg

5. Using the accelerator model in which the level of inventories in current period depends on the expected sales following this equation: N₁= a ESt Where N stands for the current level of inventories, ESt stands for the level of expected sales and alpha is a parameter equal to 0.6. The growth or increase in inventories is given by AN, = B(N₁-N₁₁) where Beta parameter is equal to 0.3 7 a) Suppose that the initial level of inventories is zero and the forecasting for sales for this period is equal to 200. Can you quantify the level of inventory investment? What would it be total production in period 1? Now suppose that in the second period there growth of inventories is 12%. What is the value of inventory investment for period 2 and forecasting sales for period 2? 1

5. Using the accelerator model in which the level of inventories in current period depends on the expected sales following this equation: N₁= a ESt Where N stands for the current level of inventories, ESt stands for the level of expected sales and alpha is a parameter equal to 0.6. The growth or increase in inventories is given by AN, = B(N₁-N₁₁) where Beta parameter is equal to 0.3 7 a) Suppose that the initial level of inventories is zero and the forecasting for sales for this period is equal to 200. Can you quantify the level of inventory investment? What would it be total production in period 1? Now suppose that in the second period there growth of inventories is 12%. What is the value of inventory investment for period 2 and forecasting sales for period 2? 1

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter5: Business And Economic Forecasting

Section: Chapter Questions

Problem 7E: The Questor Corporation has experienced the following sales pattern over a 10-year period: Compute...

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