Cypress River Landscape Supply is a large wholesale supplier of landscaping materials in Georgia. Cypress River’s sales vary seasonally; sales tend to be higher in the spring months than in other months.
a. Suppose Cypress River estimates a linear trend without accounting for this seasonal variation. What effect would this omission have on the estimated sales trend?
b. Alternatively, suppose there is, in fact, no seasonal pattern in sales, and the trend line is estimated using dummy variables to account for seasonality. What effect would this have on the estimation?