Jeng-Mei Chen, Inc., an upscale Manhattan restaurant, would like to generate a sales forecast based on the assumption that next year sales are a function of current income, advertising, and advertising by a competing restaurant:
A. Write an equation for predicting sales based on the assumption that the percentage change in sales is twice as large as the percentage change in income and advertising; but only one-fourth as large as, and of the opposite sign of, the percentage change in competitor advertising. Use the symbols S = sales, Y = income, A = advertising, and CA = competitor advertising.
B. During the current year, sales total $2,000,000, income is $84,700 per capita, advertising is $500,000, and competitor advertising is $300,000. Previous period levels were $77,000 (income), $400,000 (advertising), and $400,000 (competitor advertising). Forecast next year sales.