Bailey

P 8 8.5 9 9.5 10 10.5 11 11.5 12 12.5 13 13.5 14

Q 300 275 250 225 200 175 150 125 100 75 50 25 0

Observations 1 2 3 4

One good aspect of starigh

Q' 300 275 257 230 197 160 142 121 97 70 55 28 6

demand curve
Linear Regre 10 f(x) = -0.02x + 14 ssion 0 for P 400 0 20 P

Linear Regre ssion for P

p Q=

-0.02*Q +14

Observations The rate of change in price and quantity is fixed The relationship is inverse The would lead to a straight line If we can use 'add trendline', we can get the equation of the demand schedule

One good aspect of staright line demand curve is that prediction power is 100%

P 8 8.5 9 9.5 10 10.5 11 11.5 12 12.5 13 13.5 14

P
20 10 0 0 f(x) = -0.02x + 13.98 R = 1 50 100 150 200 250 300 350 P Linear Regression for P

Elasticity is responsiveness to price change Elasticity of demand is the responsiveness of quantity demanded to price change to be very precise percentage of change in quantity due to 1 percent change in price

if we dont know if the direction then (q2-q1)/(q1+q2)/2 (p2-p1)/(p1+p2)/2

calcluatin the elasticityu from the demand curve dQ/Q dP/P = dQ*P dP*Q

ce change

Quantity Demande d 36 32 28 24 20 16

Price 9 10 11 12 13 14

P
16 14 12 10 8 6 4 2 0 15 f(x) = -0.25x + 18

20

25

P = -0.25Q+18 Q = 72-4P Q = 72 - 44 Q = 18 ep = -1.57

Price
Price Linear Regression for Price

= -0.25x + 18

20

25

30

35

40

-0.05