a. Run a regression to determine the inverse demand function (P = f(Q)) and the

Question

a. Run a regression to determine the inverse demand function (P = f(Q)) and the direct demand function (Q = f(P)). How much confidence do you have in this estimated equation?
b. What is the point price elasticity of demand when P=$60? How would you characterize demand when the price is around $60?
c. What is the point price elasticity of demand when P=$80? How would you characterize demand when the price is around $80?
d. What would you recommend if the company was currently charging P=$60? If it was charging P=$80?
e. Determine an equation for MR as a function of Q, and create a graph of P and MR on the vertical and Q on the horizontal axis.

P Q
120 45.7
110 182.1
100 240.6
90 332.9
80 498.0
70 522.4
60 644.1
50 746.3
40 815.7

Explanation / Answer

Do you have Excel? If yes put the Ps in one column and the Qs in the next column, Then follow http://www.jeremymiles.co.uk/regressionbook/extras/appendix2/excel/ Just make two linear linear regressions P = a + bQ Q = a + bP where a and b are constants, excel will estimate. Excel will also give you standard deviation and R^2, P-value etc Does this help? if no ask

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