A Firm Has Been Using the Following Equation to Predict

question 153

Essay

A firm has been using the following equation to predict annual demand for helix gears:
Y_t = 55 + 4t
Demand for the past few years is shown below.Is the forecast performing as well as it might?
Explain.
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Definitions:

Equilibrium Price

The market price at which the supply of an item matches its demand, resulting in an efficient market condition where there is no excess supply or demand.

Inverse Demand Function

A mathematical function that expresses price as a function of quantity demanded, depicting how the market price of a good will adjust to balance demand with supply.

Inverse Supply

A concept describing the relationship between the price of a good and the quantity supplied, typically showing that as price decreases, the quantity supplied decreases.

Pareto Optimal

A state of allocation of resources from which it is impossible to reallocate so as to make any one individual or preference criterion better off without making at least one individual or preference criterion worse off.