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- Interpret the coefficients and calculate the price elasticity of soft drink demand.Estimate the double-log (log linear) time trend model for log cruise ship arrivals against log time. Estimate a linear time trend model of cruise ship arrivals against time. Calculate the root mean square error between the predicted and actual value of cruise ship arrivals. Is the root mean square error greater for the double log non-linear time trend model or for the linear time trend model?The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned-ride snowmobiles. The model specifies that sales 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 past data, the best estimate of this relationship is S=kYZP where k has been estimated (with past data) to equal 100. If Y=11,000,Z=1,200, and P=20,000, what value would you predict for S? What happens if P is reduced to $17,500? How would you go about developing a value for k? What are the potential weaknesses of this model?
