The forecasting staff for the Prizer Corporation has developed a model to predic

Question

The forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned ride snowmobiles. The model specifies that the S vary jointly with disposable personal income Y and the population between ages 15 and 40,Z, and inversely with the price of the snowmobiles P. Based on the past data, the best estimate of this relationship is S= K *YZ/P where k has been estimated (with the pst data) to equal 100. If Y=$11,000, Z= $1,200, and P=$20,000 d) what are the potential weaknesses of this model?

Explanation / Answer

given the function as S= K*YZ/P where k=100 a constant, when: y=$11000, Z=1200 and P=$20000, the total sales are: S=100(11000*1200)/20000= $66000 however when the P is reduced to $17500, the sales are: S=100(11000*1200)/17500= $75428.57143. it shows that when the price is reduced to $17500, the sales increases by $75428.57143 - $66000= $9428.571429 that makes 14.29% increase in sales. Excell worksheet Working k y z p the s 100 11000 1200 20000 66000 100 11000 1200 17500 75428.57143 9428.571429

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