The quarterly sales data (number of copies sold) for a college textbook over the past three years follow:
a. Construct a time series plot. What type of pattern exists in the data?
b. Use a regression model with dummy variables as follows to develop an equation to account for seasonal effects in the data. Qtr1 = 1 if quarter 1, 0 otherwise; Qtr2 = 1 if quarter 2, 0 otherwise; Qtr3 = 1 if quarter 3, 0 otherwise.
c. Based on the model you developed in part b, compute the quarterly forecasts for next year.
d. Let t = 1to refer to the observation in quarter 1 of year 1; t = 2to refer to the observation in quarter 2 of year 1; . . . ; and t = 12 to refer to the observation in quarter 4 of year 3. Using the dummy variables defined in part b and t, develop an equation to account for seasonal effects and any linear trend in the time series.
e. Based upon the seasonal effects in the data and linear trend, compute the quarterly forecasts for next year.
f. Is the model you developed in part b or the model you developed in part d more effective? Justify your answer.