Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN: 9781305506381
Author: James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher: Cengage Learning
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Chapter 4, Problem 1.1CE
To determine
Multiple linear regression model to estimate the demand function.
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Suppose that an economist has been able to gather data on the relationship between demand and price for a particular product. After analyzing scatterplots and using economic theory, the economist decides to estimate an equation of the form Q= aPb, where Q is quantity demanded and P is price. An appropriate regression analysis is then performed, and the estimated parameters turn out to be a = 1000 and b = - 1.3. Now consider two scenarios: (1) the price increases from $10 to $12.50; (2) the price increases from $20 to $25. a. Do you predict the percentage decrease in demand to be the same in scenario 1 as in scenario 2? Why or why not? b. What is the predicted percentage decrease in demand in scenario 1? What about scenario 2? Be as exact as possible.
The following data relate the sales figures of the bar in Mark Kaltenbach's small bed-and-breakfast inn in portland, to the number of guest registered that week:
week guests bar sales
1 16 $330
2 12 $270
3 18 $380
4 14 $315
a) The simple linear regression equation that relates bar sales to number of guests(not to time) is (round your responses to one decimal place):
Bar sales = [___]+[___]X guests
Define coefficients of the Linear Regression Model?
Chapter 4 Solutions
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
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