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I’m stuck on a Economics question and need an explanation.

Managing Ashland MultiComm Services

(Basic Business Statistics, 14th Ed)

To ensure that as many trial subscriptions to the 3-For-All service as possible are converted to regular subs, the marketing dept works closely with the customer support dept to accomplish a smooth initial process for the trial sub customers. To assist in this effort, the marketing dept needs to accurately forecast the monthly total of new regular subscribers.

A team consisting of managers from the marketing and customer service depts was convened to develop a better method of forecasting new subscriptions. Previously, after examining new subscription data for the prior three months, a group of managers would develop a subjective forecast of the number of new subs. Livia Salvador, who was recently hired by the company to provide expertise in quantitative forecasting methods, suggested the department look for factors that might help in predicting new subs.

Members of the team found that the forecasts in the past year had been particularly inaccurate because in some months, much more time was spent on telemarketing than in other months. Livia collected data (found in the AMS13.xlsx file in the Data folder) for the number of new subs and hours spent on telemarketing for each month in the past two years.

1. What are possible criticisms of only using the data from the previous three months to forecast new subscriptions?

2. What factors other than telemarketing hours may be useful in predicting the number of new subscriptions?

3. Develop a regression model to predict the number of new subs per month based on the hours spent on telemarketing. Estimate this model and check the assumptions.

4. If you expect to spend 1,200 hours on telemarketing per month, estimate the number of new subs for the month.

5. What would be the danger in predicting the number of new subscriptions in a month in which 2,000 hours were spent on telemarketing?

Also, I will give you one classmate’s discussion for you to response after you finish this discussion. Thanks.

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