You have developed a regression model with four independent

You have developed a regression model with four independent variables (a time trend variable and 3 seasonal dummies). The demand model is specified as: Ft = a0 + a1 *Trend + a2 *Quarter 1 + a3 * Quarter 2 + a4 * Quarter 3, where Ft = total air passenger-miles (billions). Use the coefficients from the results and forecast air passenger-miles for the 4th quarter of 2013 (use 3 decimal places).

Table 2. Total air passenger-miles (input data) Year Quarte Air Trend passenger- miles (Billions) 178 202 213 187 181 208 221 2012 01 Q2 Q3 04 01 02 03 Q4 4 5 6 7 2013

Solution

When determining the value for Q4 we will put the dummy variable values for Q1, Q2, Q3 as 0.

The trend value for Q4 2013 will be 8, following the sequence given.

Putting the coefficients from the above table in the given equation we get the

Ft = 198.786 + (-0.554 * 8) + (-5.204 * 0) + (18.550 * 0) + (25.704 * 0)

Ft = 194.354

Hence, the total air passenger-miles is 194.354 billions