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ACCA Strategic Professional · Advanced Performance Management · Data science and analytics

Crestline Airways has a model that forecasts demand for each flight. It now adds an optimisation engine that, given forecast demand, seat capacity, fuel costs and competitor fares, recommends the ticket price for each flight each day to maximise contribution, and tests the effect of alternative price choices. Which statement is most accurate?

This is prescriptive analytics. Although demand forecasting is an input, the system goes further by optimising and recommending the price for each flight to maximise contribution, while testing alternatives under constraints. Recommending the best action is the defining feature that separates prescriptive from predictive analytics.

  1. AThis is still predictive analytics, because demand forecasting is the core input
  2. BThis is prescriptive analytics, because it recommends actions and evaluates alternatives to achieve an objectiveCorrect
  3. CThis is diagnostic analytics, because competitor fares explain demand
  4. DThis is descriptive analytics, because it reports prices and capacity

Explanation

Adding optimisation that recommends the best price to maximise contribution, subject to constraints and evaluating alternatives, is prescriptive analytics. The forecast alone would be predictive, but the recommended decision is the distinguishing feature. Explaining demand with competitor fares is not the purpose here.

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