Question 1

Econometric models are basically regression models that involve a system of equations.

Accepted Answer

Econometric models are often regression models where several variables are related to each other in a system of equations. These equations are estimated using statistical methods to make predictions and inferences about economic behavior.

Question 2

Exponential smoothing prevents overreaction to extremes in the actual observed values.

Accepted Answer

Exponential smoothing considers the previous values and makes a weighted average to forecast the future values. As the weightage given to the previous values decreases exponentially, the influence of extreme values also decreases gradually. Therefore, exponential smoothing can prevent overreaction to extremes in the actual observed values.

Question 3

Fast-food restaurants use a causal model to forecast daily demand for menu items.

Accepted Answer

False

Question 4

The key feature of the historical analogy method is that it assumes some future event is related to the occurrence of an earlier event.

Accepted Answer

The answer of The key feature of the historical analogy...

Question 5

Both measures of forecast accuracy, MAD and MSE, give equal weight to all forecasting errors.

Accepted Answer

MAD (Mean Absolute Deviation) considers the absolute difference between the forecasted value and actual value while MSE (Mean Squared Error) considers the square of the difference between forecasted value and actual value. MSE gives more weight to larger errors due to the squaring operation. Therefore, MSE does not give equal weight to all forecasting errors.

Question 6

Seasonal adjustment involves the deseasonalization of data in a given cycle after smoothing.

Accepted Answer

The answer of Seasonal adjustment involves the deseasonalization of data...

Question 7

Subjective models are used to assess the future impact of changing demographics.

Accepted Answer

Subjective models rely on expert opinions and judgments to estimate the future impact of changing demographics. Therefore, they are often used in forecasting demographic trends and their effects on various areas such as healthcare, education, and the economy.

Question 8

Most forecasting models assume that the underlying pattern of behavior of their data will remain the same. The only component of error is attributable to random fluctuations that are not under the control of anyone.

Accepted Answer

Most forecasting models do assume that the underlying pattern of behavior of their data will remain the same, and any errors in the forecast are typically attributed to random fluctuations that cannot be controlled.

Question 9

Both trend and seasonal adjustments can augment a single exponential-smoothing model.

Accepted Answer

Both trend and seasonal adjustments can be incorporated into a single exponential-smoothing model, allowing for more accurate forecasting and analysis. This is known as multiplicative exponential smoothing or additive exponential smoothing, which adjusts for both trend and seasonality in the data.

Question 10

The forecast horizon for a cross-impact analysis method is medium-term.

Accepted Answer

The answer of The forecast horizon for a cross-impact analysis...

Question 11

Because of the nontangible nature of service, forecasting does not play as important role in service operations as in manufacturing operations.

Accepted Answer

The statement is false. Although forecasting may be more challenging in service operations due to the intangible nature of services, it still plays an important role in service operations as it helps to predict demand and allocate resources accordingly.

Question 12

The trade-off to be made with respect to accuracy is between the costs of inaccurate forecasts and the costs of increasing the accuracy of forecasts.

Accepted Answer

This statement is true. When making forecasts, there is a trade-off between accuracy and cost. The cost of inaccurate forecasts may include lost revenue, wasted resources, and reputation damage. On the other hand, increasing the accuracy of forecasts may require more resources, time, and money. Therefore, decision-makers need to find the right balance between the costs of inaccurate forecasts and the costs of improving the accuracy of forecasts.

Question 13

In the Delphi method, the opinions of experts are collected, then the analyst resolves differences of opinion to arrive at a consensus.

Accepted Answer

In the Delphi method, the opinions of experts are collected anonymously and summarized by the facilitators. Experts then review the summary and revise their opinions in subsequent rounds, with the process repeating until a consensus is reached, without the analyst directly resolving differences.

Question 14

Historical analogy involves comparative analysis of the introduction and growth patterns of new items with similar previously introduced items.

Accepted Answer

Historical analogy is the use of comparisons between current or new events, ideas, processes or items with similar ones that have occurred in the past. It involves studying and analyzing the similarities and differences between the two events or items, in order to gain insight and understanding about how the new item may perform or develop.

Question 15

The main advantage that simple moving-average models have over exponentially-smoothed models is that they can be made to give any desired weight to specific periods in the past.

Accepted Answer

Simple moving-average models assign equal weight to all periods in the average, whereas exponentially-smoothed models can give more weight to recent observations, allowing for more flexibility in weighting past periods.

Question 16

The selection of candidate independent variables for a regression model to forecast motel occupancy requires input from knowledgeable marketing personnel.

Accepted Answer

Motel occupancy is closely tied to marketing efforts and strategies. Thus, marketing personnel who are familiar with the industry and consumer behavior can provide valuable insights into the factors that influence motel occupancy. These factors could include location, pricing, amenities, promotions, and competitors, among others. Therefore, their input is essential in selecting relevant independent variables for a regression model that can accurately forecast motel occupancy.

Question 17

The cost of formulating, developing, and testing regression models, plus the expertise required to interpret results, often dictates the use of this model only for medium-term or long-term forecasting.

Accepted Answer

The statement is true. The cost and expertise required for regression modeling often limit its use to medium-term or long-term forecasting.

Question 18

Costs for preparing time series forecasts generally are lower than for other models.

Accepted Answer

Time series forecasting models typically require less expensive data preparation compared to other models, which can involve complex feature engineering and data cleaning. Time series models may require some basic pre-processing, such as filling missing values or handling outliers, but overall the cost is generally lower.

Question 19

One reason exponential smoothing is so popular is the ease with which it can be made to accommodate trend and seasonality in its forecasts.

Accepted Answer

Exponential smoothing allows for the inclusion of trend and seasonality in its forecast by using different smoothing parameters for each component, making it a popular choice for time series forecasting.

Question 20

The greatest advantage of subjective techniques like Delphi method and cross-impact analysis, is that the methods are fairly standardized and do not require much expertise in actual use.

Accepted Answer

The statement is false. Subjective techniques like Delphi method and cross-impact analysis require expertise in their application, and their results can vary based on the assumptions and judgments of the experts involved.

Quiz 14: Forecasting Demand for Services