Question

ROBAT O Search W Wikipedia A AE De Signature Line Date & Time Online Video Comment Link Bookmark Cross- reference Header Footer Page Number Header & Footer А Text Quick WordArt Drop Box Parts Object ins Media Links Comments Text PART 2: Demand 21 points] Section A p = f(x) forml 1. 1" Order: Use the Chart feature of Excel to help... a. [4... derive the product's linear (1* order) trend line equation p = f(x). b. (1) ...identify the model's coefficient of determination—its “[(R))". Section B [x = fp) form] 1. 1Order: Use the Chart feature of Excel to help... a. 14 ... derive the product's linear (1" order) trend line equation x = f(p). b. [1]...identify the model's coefficient of determination—its "E(R)]". 2. For this Demand model in x = Rp) form... a. 2...write the numerical value for its slope and interpret this value, b. 12. ...identify the model's horizontal intercept and interpret this.value. 3. Develop the mathematical expression for its Price Elasticity of Demand coefficient "m". 4.1.1 A product's elasticity coefficient "", calculated at a specific unit price "p", may be interpreted to indicate the percent change in product Demand "I" in one direction that is associated with a 1% change in unit price "p" in the opposite direction. Calculate the coefficient of elasticity for the present product if currently p = $700. 5. Find the price "p" at which unit elasticity occurs for this product.

Answer 1

Section A 1. 1st order for p = f(x) a. The product's linear (1st order) trend line equation is p = 1635 - 0.7836 x as shown in Figure 1. b. The model's coefficient of determination R2 = 0.9448 as shown on Figure 1. Figure 1 1800 1600 1400 1200 1000 800 600 p = -0.7836 x + 1635 R2 = 0.9448 400 200 0 0 200 400 600 800 1000 1200 1400 Quantity

Section B 1. 1st Order for x = f(p) The product's linear (1st order) trend line equation is x = 2005.1 - 1.2057 p as shown in Figure 2. b. The model's coefficient of determination R2 = 0.9448 as shown on Figure 2. Figure 2. 1400 1200 1000 800 Quantity 600 400 x = -1.2057p + 2005.1 R2 = 0.9448 200 0 0 200 400 600 1200 1400 1600 1800 800 1000 Price

дхр ах = х 2. For x = f(p) a. The slope of the function is - 1.2057, which indicates that quantity decreases by 1.2057 when price increases by 1 unit and vice versa. b. The intercept is 2005.1, which indicates the level of demand which is independent of the price. 3. Price elasticity of demand (n) can be measured as: n = - 1.2057 as - 1.2057 дрх др from the above equation. 4. When p = $700, x = 2005.1 - 1.2057 (700) = 1161.11. 700 Hence, n = -1.2057 = -1.2057(0.602871) = -0.72688 1161.11 5. Suppose at price = p, elasticity becomes - 1. Hence, -1.2057? = -1 - 1.2057p -1 => -1.2057p = –2005.1 + 1.2057p 2005.1 – 1.2057p 2005.1 => -(1.2057 + 1.2057)p = -2005.1 => p = 831.509 2.4114 Hence, the unit elasticity occurs at price (p) = 831.509 = = X = =