A certain type of rare gem serves as a status symbol for many of its owners.In theory,for low prices,the demand increases,and it decreases as the price of the gem increases.However,experts hypothesize that when the gem is valued at very high prices,the demand increases with price due to the status owners believe they gain in obtaining the gem.Data on price and quantity sold were collected for a sample of 35 rare gems of this type.Which of the following would be the most appropriate analysis to perform?
A)Quadratic regression model.
B)Exponential smoothing.
C)Autoregressive modeling for trend fitting and forecasting.
D)Least-squares forecasting with monthly or quarterly data.

Question

Quizplus · Accepted Answer

A quadratic regression model can capture the non-linear relationship hypothesized by the experts that demand increases with price at high prices due to status symbol. Exponential smoothing, autoregressive modeling, and least-squares forecasting are not appropriate for capturing non-linear relationships.

A Certain Type of Rare Gem Serves as a Status