9781118041581

the worst, only a year earlier, customers bought just 34 seats. Over the four-year

period, the airline sold 87.2 seats on average.

The mean(that is, the average) gives us some idea of the level of sales we

can expect. We would also like some idea of how much the sales can deviate

from the average. The usual measure of variability is called the sample vari-

ancedefined as:

Here, Qidenotes each of the quarterly sales figures, is the overall mean, and

n is the number of observations. In short, we look at the difference between

each observation and the mean, square these differences, and then average

them. (We use n 1 instead of n for technical reasons.) As the dispersion of

the observations increases, so does the variance.

Q

s^2 

a

n

i 1

(QiQ)^2

n 1

134 Chapter 4 Estimating and Forecasting Demand

TABLE 4.1

Ticket Prices and Ticket

Sales along an Air Route

Year and Average Number Average

Quarter of Coach Seats Price

Y1 Q1 64.8 250

Q2 33.6 265

Q3 37.8 265

Q4 83.3 240

Y2 Q1 111.7 230

Q2 137.5 225

Q3 109.6 225

Q4 96.8 220

Y3 Q1 59.5 230

Q2 83.2 235

Q3 90.5 245

Q4 105.5 240

Y4 Q1 75.7 250

Q2 91.6 240

Q3 112.7 240

Q4 102.2 235

Mean 87.2 239.7

Standard deviation 27.0 12.7

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