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Case Study – 3 When observed over a long period of time, a time series data can predict trends that can forecast increase or decrease or stagnation of a variable under consideration. Such analytical studies can benefit a business for forecasting or prediction of future estimated sales or production. The table below shows the sale of an item in a district during 1996 – 2001 : | Year : | 1996 | 1997 | 1998 | 1999 | 2000 | 2001 | |---|---|---|---|---|---|---| | Sales (in lakh ₹) : | 6.5 | 5.3 | 4.3 | 6.1 | 5.6 | 7.8 | Based on the above information, answer the following questions : (i) Determine the equation of the straight-line trend. [2] (ii) (a) Tabulate the trend values of the years and also compute expected sales trend for the year 2002. [2] OR (b) Fit a straight-line trend by the method of least squares for the following data : [2] | Year : | 2004 | 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | |---|---|---|---|---|---|---|---| | Profit (₹ '000) | 114 | 130 | 126 | 144 | 138 | 156 | 164 |

CBSECBSE Class XII Board 2024Subjective· 4mImportance★★★★★
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Coding time about the mid-year makes ∑x=0\sum x=0, so a=∑yn, b=∑xy∑x2a=\tfrac{\sum y}{n},\ b=\tfrac{\sum xy}{\sum x^2}. This gives y=5.9+0.13xy=5.9+0.13x; trend values rise from 5.255.25 to 6.556.55 and the 2002 forecast is ≈₹6.81≈₹6.81 lakh. The alternative dataset gives y=138.86+7.64xy=138.86+7.64x.

Least-squares straight-line trend y=a+bxy=a+bx. With the origin shifted to the middle year so ∑x=0\sum x=0, the normal equations give a=∑yna=\dfrac{\sum y}{n} and b=∑xy∑x2b=\dfrac{\sum xy}{\sum x^2}.

(i) Six years (even count) ⇒\Rightarrow origin at mid-point 1998.51998.5, unit =12=\tfrac12 year, so x=xi−1998.50.5x=\dfrac{x_i-1998.5}{0.5}.

Year xix_iSales yyxxx2x^2xyxy
19966.5−5-525−32.5-32.5
19975.3−3-39−15.9-15.9
19984.3−1-11−4.3-4.3
19996.11116.16.1
20005.633916.816.8
20017.8552539.039.0
n=6n=6∑y=35.6\sum y=35.6∑x=0\sum x=0∑x2=70\sum x^2=70∑xy=9.2\sum xy=9.2
  1. a=∑yn=35.66=5.9a=\dfrac{\sum y}{n}=\dfrac{35.6}{6}=5.9 (approx).
  2. b=∑xy∑x2=9.270=0.13b=\dfrac{\sum xy}{\sum x^2}=\dfrac{9.2}{70}=0.13 (approx).
  3. Trend line: y=5.9+0.13xy=5.9+0.13x.

(ii)(a) Trend values y=5.9+0.13xy=5.9+0.13x for each coded xx:

YearxxTrend y=5.9+0.13xy=5.9+0.13x
1996−5-55.255.25
1997−3-35.515.51
1998−1-15.775.77
1999116.036.03
2000336.296.29
2001556.556.55
  1. Forecast for 2002: coded x=2002−1998.50.5=7x=\dfrac{2002-1998.5}{0.5}=7, so y=5.9+0.13(7)=5.9+0.91=6.81y=5.9+0.13(7)=5.9+0.91=6.81.
  2. Expected sales for 2002 ≈₹6.81\approx ₹6.81 lakh. …

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