Multiple choice

In exponential smoothening method, which one of the following is true?

  1. 0 $\leq$ $\alpha$ $\leq$ 1 and high value of $\alpha$ is used for stable demand
  2. 0 $\leq$ $\alpha$ $\leq$ 1 and high value of $\alpha$ is used for unstable demand
  3. $\alpha$ $\geq$ 1 and high value of $\alpha$ is used for stable demand
  4. $\alpha$ $\leq$ 0 and high value of $\alpha$ is used for unstable demand
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

High value of ‘$\alpha$’ shows more weightage is given to immediate forecast. Less value of ‘$\alpha$’ shows less weightage is given to immediate forecast or almost equal weightage is given. So high value of ‘$\alpha$’ is chosen when nature of demand is not reliable or unstable.

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