The ice cream store cool stuff sells exotic ice creams, including Tropical Cream
ID: 3353617 • Letter: T
Question
The ice cream store cool stuff sells exotic ice creams, including Tropical Cream and Green Mango. Cool Stuff has been varying the prices of these two flavors over the past 16 quarters and has recorded the sales data. The table shows the quantity sold of Tropical Cream, Q, given the price of a half-gallon of Tropical Cream, P, and the price of the other flavor, Green Mango, Po. Use these data to estimate the demand function for Tropical Cream. Using excel, calculate the point price elasticity of demand for half-gallon of Tropical Cream for all prices P= 22, 23, 24, 25, 26. You need to estimate a simple regression model Q=a-bP.
Q P P0 210 21 13 205 23 15 213 22 15 208 23 16 205 24 16 210 23 16 218 21 13 201 25 18 205 25 18 198 26 18 205 24 17 195 26 18 222 21 19 156 25 15 189 24 14 198 20 18Explanation / Answer
The regression equation is
Q = 297 - 4.06 P
Predictor Coef SE Coef T P
Constant 296.99 42.42 7.00 0.000
P -4.058 1.814 -2.24 0.042
S = 13.2599 R-Sq = 26.3% R-Sq(adj) = 21.1%
The point price elasticity of demand for half-gallon of Tropical Cream for all prices P= 22, 23, 24, 25, 26 are
P Q 22 207.68 23 203.62 24 199.56 25 195.5 26 191.44Related Questions
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