Question

Hawaiian Shaved Ice, in Newton Grove, NC, sells shaved ice and snow cone equipment and supplies to individual and commercial use. Suppose you purchased a commercial grade machine and supplies from a company like Hawaiian Shaved Ice to open a shaved ice stand on a beach, busy with tourists, in summer. Because this is a new business, you've tried a number of prices and run a few specials to try to attract customers. As such, you have 20 days worth of data to analyze and help you set a more permanent price.
a)	Graph the data using a scatter plot. Using the "Insert Trendline" function in Excel, determine whether you should use linear regression or log-linear. Insert the graph below. Be sure to label both axes.
	We should use			regression.
b)	Using Excel's Regression Analysis Function, run a regression and answer the following questions about your output. Note: in the text, we are taught to take the log of both the independent and dependent variables when doing a log-linear regression so that we can interpret the coefficient of the estimated demand function as an elasticity. Excel only takes the log of the independent variable in its log-linear trendline in part a. If the log-linear regression should be used, let’s now take the approach of the text and use Excel’s Regression Analysis Function to run a regression on the log of both P and Q.
	i) What is your estimated demand function?			+
	ii) Discuss the fit and significance of the regression.	R2 =
			% of the variation in Shaved Ice Quantity is explained by our regression using Shaved Ice Price.
		The model		statistically significant.

DATA:

Return Price	Returns Completed
70	932
70	932
75	910
75	920
80	876
80	852
85	811
80	857
80	847
80	865
90	785
90	802
95	789
95	731
100	663
100	709
90	771
90	792
85	831
80	834

Answer 1

We use Excel to solve this question-

a)

b)

Estimated demand function is,
y^ = -1.120 + 5.189 * x
y^ - estimated return price
x - return completed
R2 = 0.91 therefore adequacy of the fitted model is good.
Significance F value is 0.000 therefore model is significant to the regression.
The model is statistically significant.