Question

The ice cream store cool stuff sells exotic ice creams, including Tropical Cream and Green Mango. Cool Stuff has been varying the prices of these two flavors over the past 16 quarters and has recorded the sales data. The table shows the quantity sold of Tropical Cream, Q, given the price of a half-gallon of Tropical Cream, P, and the price of the other flavor, Green Mango, Po. Use these data to estimate the demand function for Tropical Cream. Is the model globally good to predict the variation of quantity demanded of Tropical Cream at the 5% significance level?

Q	P	P0
210	21	13
205	23	15
213	22	15
208	23	16
205	24	16
210	23	16
218	21	13
201	25	18
205	25	18
198	26	18
205	24	17
195	26	18
222	21	19
156	25	15
189	24	14
198	20	18

Answer 1

To decide the goodness or significance of the model we need to compare the calculated the F- value (2.977) from ANOVA with table F-value at respective degrees of freedom. So, the 5% critical value for the F statistic with (2, 13) degrees of freedom is 0.086. Since 2.977 > 0.086, we conclude that the estimated relationship is a significant one.