Based on quarterly data collected over the last four years, the following regression equation was found to forecast the quarterly demand for the number of new copies of an economics textbook: _t = 3,305 - 665Qtr1 - 1,335Qtr2 + 305Qtr3, where Qtr1, Qtr2, and Qtr3 are dummy variables corresponding to Quarters 1, 2, and 3. The demand forecast for Quarter 2 of the next year is ________. A) 2,640 B) 1,970 C) 3,610 D) 3,305

Question

Quizplus · Accepted Answer

To forecast the demand for Quarter 2 of the next year, we need to set all dummy variables except Qtr2 to 0, and set Qtr2 to 1. Thus, the equation becomes:

Demand = 3,305 - 665(0) - 1,335(1) + 305(0) = 1,970

Therefore, the demand forecast for Quarter 2 of the next year is 1,970, which corresponds to choice (B).

Based on Quarterly Data Collected Over the Last Four Years