ch. 5-demand-forecasting(2)
DESCRIPTION
Microeconomics-SalvatoreTRANSCRIPT
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 1
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 2
Qualitative Forecasts
• Survey Techniques– Planned Plant and Equipment Spending– Expected Sales and Inventory Changes– Consumers’ Expenditure Plans
• Opinion Polls– Business Executives– Sales Force– Consumer Intentions
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 3
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 4
Time-Series Analysis
• Secular Trend– Long-Run Increase or Decrease in Data
• Cyclical Fluctuations– Long-Run Cycles of Expansion and Contraction
• Seasonal Variation– Regularly Occurring Fluctuations
• Irregular or Random Influences
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 5
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 6
Trend Projection
• Linear Trend:St = S0 + b tb = Growth per time period
• Constant Growth RateSt = S0 (1 + g)t
g = Growth rate• Estimation of Growth Rate
lnSt = lnS0 + t ln(1 + g)
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 7
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 8
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 9
Seasonal Variation
Ratio to Trend Method
ActualTrend ForecastRatio =
SeasonalAdjustment =
Average of Ratios forEach Seasonal Period
AdjustedForecast =
TrendForecast
SeasonalAdjustment
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 10
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 11
Seasonal Variation
Ratio to Trend Method:Example Calculation for Quarter 1
Trend Forecast for 1996.1 = 11.90 + (0.394)(17) = 18.60
Seasonally Adjusted Forecast for 1996.1 = (18.60)(0.8869) = 16.50
YearTrend
Forecast Actual Ratio1992.1 12.29 11.00 0.89501993.1 13.87 12.00 0.86521994.1 15.45 14.00 0.90611995.1 17.02 15.00 0.8813
Seasonal Adjustment = 0.8869
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 12
Moving Average Forecasts
Forecast is the average of data from w periods prior to the forecast data point.
1
wt i
ti
AF
w
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 13
Exponential SmoothingForecasts
1 (1 )t t tF wA w F
Forecast is the weighted average of of the forecast and the actual value from the prior period.
0 1w
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 14
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 15
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 16
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 17
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 18
Root Mean Square Error
2( )t tA FRMSE
n
Measures the Accuracy of a Forecasting Method
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 19
Barometric Methods
• National Bureau of Economic Research• Department of Commerce• Leading Indicators• Lagging Indicators• Coincident Indicators• Composite Index• Diffusion Index
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 20
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 21
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 22
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 23
Econometric Models
Single Equation Model of the Demand for Cereal (Good X)
QX = a0 + a1PX + a2Y + a3N + a4PS + a5PC + a6A + e
QX = Quantity of X
PX = Price of Good X
Y = Consumer Income
N = Size of Population
PS = Price of Muffins
PC = Price of Milk
A = Advertising
e = Random Error
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 24
Econometric Models
Multiple Equation Model of GNP
1 1 1t t tC a bGNP u
2 2 1 2t t tI a b u
t t t tGNP C I G
2 11 21
1 11 1 1t t
t
b Ga aGNP b
b b
Reduced Form Equation
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 25
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 26
Input-Output Forecasting
Producing IndustrySupplying Industry A B C
Final Demand Total
A 20 60 30 90 200B 80 90 20 110 300C 40 30 10 20 100Value Added 60 120 40 220Total 200 300 100 220
Three-Sector Input-Output Flow Table
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 27
Input-Output Forecasting
Direct Requirements Matrix
Producing IndustrySupplying Industry A B C
A 0.1 0.2 0.3B 0.4 0.3 0.2C 0.2 0.1 0.1
DirectRequirements
Input RequirementsColumn Total
=
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 28
Input-Output Forecasting
Total Requirements Matrix
Producing IndustrySupplying Industry A B C
A 1.47 0.51 0.60B 0.96 1.81 0.72C 0.43 0.31 1.33
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 29
Input-Output Forecasting
1.47 0.51 0.600.96 1.81 0.720.43 0.31 1.33
9011020
=200300100
Total Requirements
Matrix
Final Demand Vector
Total Demand Vector
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 30
Input-Output Forecasting
Revised Input-Output Flow Table
Producing IndustrySupplying Industry A B C
Final Demand Total
A 22 62 31 100 215B 88 93 21 110 310C 43 31 10 20 104
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 31
Chapter 5 Appendix
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 32
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 33
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 34
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 35
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 36
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PowerPoint Slides Prepared by Robert F. Brooker, Ph.D. Copyright 2007 by Oxford University Press, Inc. (Adapted by OUP India, 2008) Slide 37