The forecasting staff for the Prizer Corporation has developed a model to predict sales for its air-cushioned-ride snowmobiles. The model specifies that sales S very 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 the past data, the best estimate of this relationship is

YZ

S = k ____

P

Where k has been estimated (with past data) to equal 100.

(a)If Y = $11,000, Z = $1,200 and P = $20,000, what value would you predict for S?

(b)What happens if P is reduced to $17,500?

(c)How would you go about developing a value of k?

(d)What are the potential weaknesses of this model?