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Problem 1 Suppose “D” represents demand for a product and “p” represents price of the product....

Problem 1

Suppose “D” represents demand for a product and “p” represents price of the product. Suppose the following prediction equation for demand was found based on data:

D=ap-2.5

“a ” is some constant.

  1. What is the interpretation of −2.5?
  2. Suppose price were to change from $50 to $52, what is the expected change (in %) in demand?
  3. Suppose you find the best fitting model for demand to be D=450000p-2.5 . If the price is $52, then what is the predicted demand?

Must be answered in excel. Please show all work; each step by step.

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