he forecasting staff for the Prizer Corporation has developed a model to predict sales of its air-cushioned-ride snowmobiles. The model specifies that sales, S, vary jointly with disposable personal income, Y, and the population between ages 15 and 40, Z, and inversely with the price of the snowmobiles, P. Based on past data, the best estimate of this relationship is:

S=kYZPS=kYZP

where k has been estimated (from past data) to equal 100.

If Y = $15,000, Z = $1,200, and P = $24,000, what value would you predict for S?

$87,500

$75,000

$192,000

$72,000

If P is reduced to $21,500, S rises or falls to $97,674,$172,000,$83,721,or $80,000

(Note: Assume Y and Z remain constant at $15,000 and $1,200, respectively.)

Which of the following is a potential weakness of this model?

It assumes that price and sales are inversely related.

It does not account for seasonal effects.

It uses time-series data.