A certain type of rare gem serves as a status symbol for many of its owners. In theory, for low prices, the demand increases and it decreases as the price of the gem increases. However, experts
Hypothesize that when the gem is valued at very high prices, the demand increases with price due
To the status owners believe they gain in obtaining the gem. Data on price and quantity sold were
Collected for a sample of 35 rare gems of this type. Which of the following would be the most
Appropriate analysis to perform?
A) Quadratic regression model.
B) Exponential smoothing.
C) Autoregressive modeling for trend fitting and forecasting.
D) Least-squares forecasting with monthly or quarterly data.

Question

Quizplus · Accepted Answer

A quadratic regression model is appropriate because it can capture the non-linear relationship between price and demand, including the hypothesized increase in demand at very high prices.

A Certain Type of Rare Gem Serves as a Status