# The owner of the Chocolate Outlet Store wants to forecast chocolate demand. Demand for the...

## Question:

The owner of the Chocolate Outlet Store wants to forecast chocolate demand. Demand for the preceding four year in shown in the following table:

Year:1 Demand (lbs): 68,800

Year: 2 Demand (lbs): 71,000

Year: 3 Demand (lbs): 75,500

Year: 5 Demand (lbs): 71,200

Forecast demand for Year 5 using the following approaches: (1) a three-year moving average; (2) a three year weighted moving average using .40 for Year 4, .20 for Year 3. and .40 for Year 2 (3) exponential smoothing with a =.30 and assuming the forecast for Period 1 = 68,000.

## Demand:

The most important is the price of the good or service itself.Demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.Demand is an economic principle referring to a consumer's desire to purchase goods and services and willingness to pay a price for a specific good or service

## Answer and Explanation:

1. Forecast = sigma(Demand in previous N periods) / N

Where N =3

FORECAST 5 = (71000+75500+71200) / 3 =72,566.67

2. Forecast = Sigma (weight for period N * Demand for period N) / Sigma(weight)

FORECAST 2 = (71,000*0.40)+(75,500*0.20)+(71,200*0.40)/(0.40+0.20+0.40)

= (28,400+15,100+28,480) / 1

=71,980

3. F(t) = F(t-1) + (Aplha * (A(t-1) ? F(t-1)))

Where F(t-1) is the forecast for the previous period and A(t-1) is the actual demand for the previous period.

FORECAST 3 =68,800 + (0.3* (71,000-68,800)) = 69,460

FORECAST 4 =69,460 + (0.3 *(75,500-69,460)) = 71,272

FORECAST 5 =71,272 + (0.3 *(71,200-71,272)) = 71,250.4

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from Introduction to Macroeconomics: Help and Review

Chapter 7 / Lesson 11