Based on annual data from 2000-2010, the Gadget Company estimates that sales are growing according to a linear trend:
Q = 50,000 + 200t
where t is time and t = 0 in 2000.
a. Forecast sales for 2013.
b. Do you see any problems with this forecasting method?
a. 52,600
b. The equation is based on data from 2000-2010. The further away from the final year, the less likely the equation is to be correct, as more factors may alter the trend seen in the data. A further issue is that the model is based on only 11 observed values.
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According to marginal utility theory, a rise in income will
A) increase a consumer's total utility. B) increase consumption of all goods. C) increase the marginal utility of all goods. D) None of the above answers is correct.
Price elasticity of demand is defined as the ratio of the:
a. percentage increase in price to an increase in quantity demanded. b. unit change in quantity demanded to the dollar change in price. c. maximum amount that consumers will pay to increase quantity. d. percentage change in quantity demanded to the percentage change in price, other things being equal.