Question

You have been hired by joe's gas stop to estimate a demand function for its regular gasoline sales. occordingly, you collect 50 days of data on quantity sold (the dependent variable measured in gallons) and price (the explanatory variable measured in cents per gallon). the data is shown on the "gasoline demand data" tab and an x-y scatter of the data is shown at right. you use the "data analysis add-in" to estimate the regression results shown below:

Answer 1

(a) Sample correlation ==> -0.7916
(b) Standard Deviation for Quantity ==> 801.6816
(c) Standard Deviation for Price ==> 39.1660
(d) Relation to coefficient on Price ==> −16.2028

Answer 2

The R-squared value gives the measure of the coefficient of determination of the relationship, which is the proportion of variation in the dependent variable due to the regression line. Hence, about 62.66% of the variation in price is due to sales.

• The Coefficient of determination, R² = 0.6266 ; Hence, 62.66% of the variation in price is due to changes in quantity sold.

• The value of the slope -16.2028 ; gives the change in the price of gasoline per gallon sold. Hence, for every 1 gallon of sold, the price decreases by - 16.2028

Hence, there is a strong, negative relationship between quantity sold and price.

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