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 isS = k (YZ/ P)where k has been estimated (with past data) to equal 100.a. If Y = $11,000, Z = $1,200, and P = $20,000, what value would you predict for S?b. What happens if P is reduced to $17,500?c. How would you go about developing a value for k?d. What are the potential weaknesses of this 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 isS = k (YZ/ P)where k has been estimated (with past data) to equal 100.a. If Y = $11,000, Z = $1,200, and P = $20,000, what value would you predict for S?b. What happens if P is reduced to $17,500?c. How would you go about developing a value for k?d. What are the potential weaknesses of this model?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The
S = k (YZ/ P)
where k has been estimated (with past data) to equal 100.
a. If Y = $11,000, Z = $1,200, and P = $20,000, what value would you predict for S?
b. What happens if P is reduced to $17,500?
c. How would you go about developing a value for k?
d. What are the potential weaknesses of this model?
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