Section 6
Demand forecasting
True and false
1) The aim of economic forecasting is to reduce the rise or uncertainty that
the firm faces in its short run operational decision making and in planning for
its long run growth.
2) Barometric forecasting techniques are often useful in forecasting the
magnitude of a predicted economic change.
3) Exponential smoothing models are examples of econometric model building.
4) Econometric models will always give superior forecasts when compared to
other models because causal relationships are identified.
5) Time series analysis is forecasting of the value of a variable in the future
based on its value in the past.
6) Naïve forecasts are not based on causal relationships.
7) Single-equation econometric models are of almost no use in empirical demand
studies.
8) Survey and opinion-poling forecasting techniques can be useful in forecasting
the future level of sales to the firm.
9) If firms operated in a world of certainty, naïve forecasts would still not give
perfect predictions.
10) Barometric forecasting methods are most useful for long-term forecasts.
11) The Delphi method generates forecasts by surveying consumers to
determine their opinions.
12) The fundamental assumption of time-series analysis is that past patterns in
time-series data will continue unchanged in the future.
13) Naive forecasting methods include time-series analysis and smoothing
methods.
Q2 Multiple Choices:
1. Which of the following is not a forecasting technique?
a) Qualitative analysis
b) Economic method
c) In put out put analysis
d) All of the above are forecasting methods
2. Which of the following is not a qualitative forecasting technique?
a. export opinion
b. Perspectives of foreign advisory councils
c. Consumer survey
d. Time-series analysis
3. Forecasts are referred to as naive if they
a. are based only on past values of the variable.
b. are short-term forecasts.
c. are long-term forecasts.
d. generally result in incorrect forecasts.
4. Time-series analysis is based on the assumption that
a. Random error terms are normally distributed.
b. . There are dependable correlations between the variable to be
forecast and other independent variables.
c. Past patterns in the variable to be forecast will continue unchanged
into the future.
d. . The data do not exhibit a trend.
5. Which of the following is not one of the four types of variation
that is estimated in time-series analysis?
a. Predictable
b. Trend
c. Cyclical
d. Irregular
6. If regression analysis is used to estimate the linear relationship
between the natural logarithm of the variable to be forecast and
time, then the slope estimate is equal to
a. the linear trend.
b. the natural logarithm of the rate of growth.
c. the natural logarithm of one plus the rate of growth.
d. the natural logarithm of the square root of the rate of growth.
7. Econometric forecasts require
a. accurate estimates of the coefficients of structural equations.
b. forecasts of future values of exogenous variables.
c. appropriate theoretical models.
d. all of the above.
8. Which type of forecast would be the most appropriate for
predicting the demand for a brand new type of product?
a. Barometric forecasting
b. Naïve forecasting
c. Surveys and opinion-polling
d. Box-Jenkins forecasting
9. Which of the following types of forecast would probably be the
most expensive to produce?
a. all of the below are relatively inexpensive
b. exponential smoothing
c. moving average
d. multi-equation econometric model
10. In estimating the trend component of a time series, which
technique is most commonly used?
a. ratio to moving average
b. linear regression
c. exponential smoothing
d. . moving average
Q3 The following date represent sale of a given good (Y) , for the
last ten years:
Year 1 2 3 4 5 6 7 8 9 10
Sales 15 17 14 18 22 21 20 23 25 24
Y t = 13.69 + 1.13Zt
1) The value of b is equal to ….
A-2.44 b- 1.13 c- 5.67 d- 1.44
2) The value of a is equal to…….
A-13.69 b- 23.80 c- 22.80 d- 33.80
3) According to economic theory ,Take the relationship between Yt ,
Zt …….
A- Negative b- positive c- constant d- None of the above
4) Over time, future sales will ……..
A- Increase by 13.69 b- Decrease by 13.69
c- Increase by 1.13 b- Decrease by 1.13
5) Forecasting the value of sales in the next five years …….
A-$26.12 , $27.25, $28.38, $29.51, $30.64 million
b- $63.76 ,$40.67,$26.12 , $27.25, $28.38, million
c- -$26.12 , $24.27, $29.38, $29.51, $30.64 million
6) 8-To estimate the regression function we used the method …..
A-Ordinary least squares (OLS) b- Least squares in 3 stages(3SLS)
7) To forecast the value of sales we used the method …..
A- Time series analysis B- Smoothing techniques c- Elastics d- Regression &
Correlation
