Question

8. A Sensitivity analysis allows for forecasting using historical, true data. Please make and provide an example of sensitivity analysis, please be creative in making it!

Answer 1

Sensitivity analysis will be used for providing an analysis of of independent variables when it is affected by various independent factors and it is also known as what if analysis and it is used for allowance of forecasting using historical and true data.

there are two element associated with it, one is independent variable and another is dependent variable so it is used to find out the sensitivity of the dependent variable on change of independent variable so it is always used to find out the sensitivity of rate of change of dependent variable upon change of independent variable and it is used in various forecasting methods and making up decisions by what if analysis and it is used in forecasting in economics and making financial decisions

Example of sensitivity analysis will be effect of consumer traffic on the total sales and it can be seen that consumer traffic is an independent variable whereas total value of sales is a dependent variable show traffic will be leading to changes in the total sales and that will be reflected through sensitivity analysis.

it will be calculated using the rate of change of percentage in total sales through changes in terms of percentage in consumer traffic so it can be used to find out the rate of sensitivity of a dependent variable when independent variable is changed.