Question

Period	Price	Quantity
1	$4.65	33
2	$4.67	30
3	$4.62	35
4	$4.59	40
5	$4.57	43
6	$4.58	40
7	$4.55	50
8	$4.50	52
9	$4.52	49
10	$4.50	53
11	$4.43	57
12	$4.45	55
13	$4.42	59
14	$4.40	64
15	$4.44	60
16	$4.37	70
17	$4.35	72
18	$4.32	75
19	$4.37	80
20	$4.26	88

Given the data provided to you in class, use the regression toll in Excel to perform a regression on Y and X

a) what is the vertical intercept and slope of the regression equation?

b) is the equation consistent with the law of demand or the law of supply?

c) is the X variable statstically significant at the 5% level? why or why not?

d) how much of the variation in Y dose X explain?

Answer 1

a. The estimated equation is : P = 4.86 - 0.007 Quantity.

Thus, vertical intercept is 4.86 and slope of the regression equation is 0.007.

b. Yes, the equation shows a negative relation between price and quantity demanded of the product and thus it satisfies law of demand.

c. Since t value is 19 which is greater than tabulated value of t. Thus, X variable is statistically significant at the 5 per cent level.

d. The value of R squared is 95.91 per cent and thus around 95 per cent of the variations in Y are explained by the variations in X.