28. Soft Touch Carpet Installers is trying to select a forecasting model to determine the number of carpet installers the company will require each month. A relationship is thought to exist between the demand for carpet installation and the number of building permits issued some months prior to the demand. Given below are the number of building permits issued and the demand for carpet installation in a series of months.

a. Using the first 8 months of building permit data, compute the coefficient of linear correlation between demand for carpet installation in a l-month period and the number of building permits issued 2 months prior to that period (a 2-month lag model).

b. Using the first 8 months of building permit data, compute the correlation coefficient for a 3-month lag model.

c. Using the first 8 months of building permit data, compute the correlation coefficient for a 44month lag model.

d. The company is considering the development of a linear regression model to estimate demand on the basis of building permits issued in some prior month. Against which month’s building permits should the demand data be regressed to develop the best model?

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MONTH BUILDING PERMITS ISSUED DEMAND FOR CARPET INSTALLATION 87 11 123456 789012 506 2 491 84 517 76 563 82 5 619 81 6 632 86 686 95 692 107 703 117 714 125 652 118 619 121