What Is "Forecasting Error"? Why Is It Important to the Analysis

question 312

Essay

What is "forecasting error"? Why is it important to the analysis of capital expenditure projects?

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Definitions:

Externality

A consequence of an economic activity experienced by unrelated third parties; it can be positive or negative.

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity of that good that suppliers are willing to sell.

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded by consumers at different prices.

Social Costs

The total cost to society, including both private costs incurred by firms and external costs to individuals not involved in a transaction.