Examine these two graphs and based on the demand pattern and axis scaling, recommend a forecasting technique (and the required parameters) that would work best for each one. Justify your recommendations
What will be an ideal response?
Answer: Demand Pattern A shows a strong linear trend from 103 up to 207 but Demand Pattern B fluctuates around 169 and (with a standard deviation of 4) is purely random. Adjusted exponential smoothing or linear regression are the only suitable methods for Demand Pattern A. A linear equation of the form Y = 95.98 + 5.82X yields an R squared of 0.99. The randomness in Demand Pattern B is pure noise and therefore not predictable. Moving averages with a large n or exponential smoothing with a low alpha will smooth this randomness but don't truly add much in the way of predictive ability.
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