a. For each additional $1 decrease in the price of the product, the demand decre

Question

a. For each additional $1 decrease in the price of the product, the demand decreases by 27.71 units.

b. Cannot determine by the information given.

c. For each additional $1 increase in the price of the product, the demand decreases by 27.71 units.

d. For each additional $1 increase  in the price of the product, the demand increases by 27.71 units.

The following is an output from Excel concerning the demand (y) and price (x) of a consumer product. SUMMARY OUTPUT Regression Statistic:s Multiple R R Square Adjusted R Square 0.98694128 Standard Error .191237852 Observations 0.994762798 0.989553024 Coefficients Standard Error t Stat P-value Lower 95% Upper 95% 306.6190476 3.592572332 85.34805 1.13E-07 296.6444678 316.5936 Intercept Price, x -27.71428571 1.423801561 -19.465 4.11E-05 -31.66739259 -23.7612

Explanation / Answer

Note that by definition, the slope is the expected change in y for every unit increase in x.

Hence, as the slope is -27.71, then we expect y to decrease by 27.71 units for everu 1 unit increase in x, so

OPTION C: c. For each additional $1 increase in the price of the product, the demand decreases by 27.71 units. [ANSWER, C]

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