A soft drink bottler collected monthly data on its sales of 12 ounce cans at different prices.
a. Use Excel chart wizard to produce a scatter plot for price and quantity. Do you visually detect linear or non-linear relation?
b. Run a simple linear regression: Q = a + bP
c. If price is cut by $.10, by how much will the volume of sales increase?
d. What is the price elasticity of demand at price of 55 cents? Note: You need to use regression result from part b.
e. Use the exponential function model Q = aPb to estimate the demand? Does this equation fit the data better than the linear equation in part b? Explain. Make sure that you make a reference to R square, P-value and F statistics.
f. What is the price elasticity of demand from the exponential model?
Table 2 - Soft Drink
Months Quantity Price
1 98 0.45
2 80 0.50
3 95 0.45
4 123 0.40
5 163 0.35
6 168 0.35
7 82 0.50
8 68 0.55
9 96 0.45
10 77 0.50
11 130 0.40
12 125 0.40