Unit 3: Demand Estimation - Practice Quiz

1 What does demand estimation primarily involve for a firm?

2 Why is demand estimation important for a firm's production planning?

3 Demand forecasting mainly helps a firm to predict:

4 Which of the following business decisions is directly supported by demand estimation?

5 Demand estimation assists in pricing decisions because it reveals:

6 Qualitative forecasting methods rely mainly on:

7 The Delphi method is an example of which type of forecasting?

8 Which method involves asking a panel of experts and reaching consensus through repeated anonymous questionnaires?

9 A time series is a set of data arranged in order of:

10 Which of the following is a component of a time series?

11 The long-term general movement of data in a time series is called the:

12 Regular fluctuations that repeat within a year, such as higher ice-cream sales in summer, are called:

13 Wave-like fluctuations that occur over periods longer than a year, linked to business booms and recessions, are called:

14 Unpredictable, irregular changes in a time series caused by events like floods or strikes are known as:

15 The moving average method in time series analysis is mainly used to:

16 In the consumer survey method of forecasting, information is collected by:

17 Which of the following is a qualitative forecasting technique?

18 The trend line fitted using the least squares method takes the general form:

19 Which forecasting approach is most suitable when there is no historical data for a brand-new product?

20 Accurate demand estimation helps a firm reduce:

21 A firm launching a new product wants to decide on plant capacity for the next five years. Which use of demand estimation is MOST directly relevant to this decision?

22 Why is accurate demand estimation particularly important for a firm holding perishable inventory?

23 A manager uses demand estimates to schedule raw material purchases and labor shifts for the coming quarter. This reflects the role of demand estimation in:

24 Which statement BEST explains how demand estimation supports pricing decisions?

25 A firm entering a brand-new market with no historical sales data would MOST appropriately use which forecasting approach?

26 In the Delphi method, why are experts kept anonymous during the rounds of questioning?

27 A time series is typically decomposed into four components. Which of the following is NOT one of them?

28 Sales of umbrellas rise sharply every monsoon and fall in dry months, repeating each year. This pattern is an example of which time series component?

29 The following are quarterly sales (in units): 40, 44, 48, 52. Using a 4-quarter simple moving average, the forecast for the next period is:

30 In exponential smoothing, the forecast for the next period is . What does a smoothing constant close to 1 imply?

31 Given the last forecast , actual demand , and smoothing constant , the exponential smoothing forecast for the next period is:

32 A least-squares trend line estimated from annual data is , where in the base year. The forecast sales for is:

33 Which situation reflects the cyclical component of a time series rather than the seasonal component?

34 A major limitation of the simple moving average method for demand forecasting is that it:

35 The "survey of buyers' intentions" method of forecasting is classified as which type of technique?

36 How does reliable demand estimation help a firm control its inventory costs?

37 In the "sales force composite" method, forecasts are built by:

38 Annual sales grow by a roughly constant amount each year over a long period with no reversals. This long-run movement is best captured by which time series component?

39 A one-time drop in sales caused by an unexpected flood that closed the factory would be recorded in a time series as:

40 A firm wants a short-run forecast that responds quickly to recent demand shifts using minimal past data. Which method is most suitable?

41 A firm fits a multiplicative time series model . If the trend value for Q3 is , the seasonal index for Q3 is , and the cyclical relative is , what is the deseasonalized-and-detrended cyclical-adjusted expected value (ignoring the irregular component)?

42 In the ratio-to-moving-average method, a quarterly seasonal index is computed as . If the sum of the four raw quarterly indices is instead of , what is the adjusted index for that quarter?

43 A linear trend is fitted using coded time where at 2020. The multiplicative seasonal index for Q2 is . What is the forecast for Q2 of 2024 if increments by 1 per year and the annual trend must be divided across quarters equally?

44 Using exponential smoothing with , the forecast for period was and actual demand was . Applying the same smoothing constant, what is the forecast error's contribution to the next forecast?

45 A firm compares two exponential smoothing models with and . During a period of sudden, sustained level shift in demand, which statement is most accurate?

46 A firm with high fixed costs and long production lead times most critically depends on accurate demand estimation primarily because:

47 In the Delphi method, why is controlled feedback with anonymity considered superior to a face-to-face expert panel for demand forecasting?

48 A 4-period centered moving average is used on quarterly data. Why must the average be centered (using a 2-step averaging of successive 4-quarter means) rather than used directly?

49 Given the semi-log trend model , what is the estimated compound growth rate of demand per period?

50 Two forecasting models yield the following errors over 4 periods: Model A , Model B . Comparing on MAD, which is preferred and why?

51 A firm's demand series shows errors that consistently under-forecast (positive errors accumulate). Which tracking measure best detects this bias, and what does it reveal that MAD hides?

52 A firm estimates demand elasticity to guide pricing. It finds . If it wrongly treats demand as elastic and cuts price to boost revenue, the likely outcome is:

53 A least-squares linear trend is fitted with coded time so that . Given , , , and , what is the fitted trend equation?

54 Why can extrapolating a fitted time-series trend far into the future be dangerous even when the historical fit () is very high?

55 A quadratic trend is estimated (coded time). At what value of does forecasted demand peak, and what is the peak value?

56 For a firm launching a genuinely new product with no historical sales data, which forecasting approach is most defensible and why?

57 A firm uses a weighted moving average with weights (most recent to oldest) on demand ordered oldest to newest. What is the forecast for the next period?

58 Under the additive time series model versus the multiplicative model , which situation favors the multiplicative form?

59 A demand series has actual and forecast pairs giving absolute percentage errors of over four periods. What is the MAPE, and what is its key interpretive limitation here?

60 A manager argues that because demand estimation is always subject to error, the firm should abandon forecasting and simply react to realized demand. The strongest counterargument is: