A company wants to make a short term forecast for the demand of its services. They collect data for 5 periods of history, and use a simple exponential smoothing method. 2 forecasts are made: in forecast A, a smoothing constant of 0.3 is used. In forecast B. a smoothing constant of 0.8 is used The results are given in the following table:
period 1 demand 120 Forecast A Forecast 8 2 135 120 120 3 130 124.5 132 4 150 126.15 130.4 5 165 133.305 146.08
a) Which forecast method is better, forecast A or forecast B? Motivate your answer. b)Make a forecast for the demand in period 6. based on your previous conclusion. c)Given your answer to question la, is it likely that there is a trend in these data? Motivate your answer.