You are the manager of a large automobile dealership who wants to learn more about the effectiveness of various discounts offered to customers over the past 14 months. Following are the average negotiated prices for each month and the quantities sold of a basic model (adjusted for various options) over this period of time.
a. Graph this information on a scatter plot. Estimate the demand equation. What do the regression results indicate about the desirability of discounting the price? Explain.
Month Price Quantity
Jan. 12,500 15
Feb. 12,200 17
Mar. 11,900 16
Apr. 12,000 18
May 11,800 20
June 12,500 18
July 11,700 22
Aug. 12,100 15
Sept. 11,400 22
Oct. 11,400 25
Nov. 11,200 24
Dec. 11,000 30
Jan. 10,800 25
Feb. 10,000 28
b. What other factors besides price might be included in this equation? Do you foresee any difficulty in obtaining these additional data or incorporating them in the regression analysis?