If a firm produced a product that was experiencing growth in demand, the smoothing constant alpha (reaction rate to differences) used in an exponential smoothing forecasting model would tend to be which of the following?
A) Close to zero
B) A very low percentage, less than 10 percent
C) The more rapid the growth, the higher the percentage
D) The more rapid the growth, the lower the percentage
E) 50 percent or more

Question

Quizplus · Accepted Answer

In exponential smoothing forecasting models, a higher smoothing constant (alpha) means the model gives more weight to the most recent actual demand data, making it more responsive to changes or trends in the data. Therefore, for a product experiencing rapid growth in demand, a higher alpha would be used to more quickly adjust the forecast to reflect this growth.

If a Firm Produced a Product That Was Experiencing Growth