Question

Using the data in the table below, estimate the demand function for cod Quantity, thousand pounds per da Price, dollars per pound 1.90 1.35 1.25 1.20 0.95 0.85 0.73 2.2 4.4 5.9 6.5 7.0 8.8 Using the Excel trendline option to estimate a linear demand function, the linear demand function is Q12.53 -6.25p Suppose the quantity in the first row of the table were 2.5 instead of 1.5. The linear demand function would now be Q-11.75-5.46 p. (Enter your responses rounded to two decimal places.) Suppose the quantity in the second row of the table were 3.2 instead of 2.2 The linear demand function would now be p. (Enter your responses rounded to two decimal places)

Answer 1

Lets first find coefficient of Price

Coefficient of Price= Covariance (Q,P)/Variance (P)

Cov(Q,P)=Sum(Q-Q_)(P-P_)

Q_ is mean of Q and P_ is mean nof P

Cov(Q,P)=-0.814

V(P)=0.134

We ran Trend line to find regression line will be

Q=12.45-6.06P

SUMMARY OUTPUT
Regression Statistics
Multiple R	0.959087
R Square	0.919848
Adjusted R Square	0.903818
Standard Error	0.765911
Observations	7
ANOVA
	df	SS	MS	F	Significance F
Regression	1	33.66118	33.66118	57.38156	0.000636
Residual	5	2.933101	0.58662
Total	6	36.59429
	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%	Lower 95.0%	Upper 95.0%
Intercept	12.45277	0.984026	12.65492	5.47E-05	9.923251	14.98229	9.923251	14.98229
X Variable 1	-6.05946	0.799923	-7.57506	0.000636	-8.11573	-4.0032	-8.11573	-4.0032