Coding quantitative data
Use the coding system for observational data to fit a second-order model to the data on demand y and price p given in the following table.
Show that the inherent multicollinearity problem with fitting a polynomial model is reduced when the coded values of p are used.
|
DEMAND
|
|
DEMAND y, pounds
|
1,120
|
999
|
932
|
884
|
807
|
760
|
701
|
688
|
|
PRICE p, dollars
|
3.00
|
3.10
|
3.20
|
3.30
|
3.40
|
3.50
|
3.60
|
3.70
|