The forecasting staff for the Prizer Co. has developed a model to forecast sales of its air-cushioned-ride snowmobiles. The model specifies that sales S differ jointly with disposable personal income Y and the population between ages 15 and 40, Z, and inversely with the price of the snow mobiles P. Based on past data, the best approximation of this relationship is *YZ/P where k has been estimated (with past data) to equal 100.
a) If Y = $11,000, Z = $1,200, and P = $20,000, then what value would you predict for S?
b) What happens if P is decreased to $17,500?
c) How would you go about developing a value for k?
d) What are the potential weaknesses of his model?