In Figure 3.5 two estimated demand curves are shown. These demand curves result from regression equations in
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In Figure 3.5 two estimated demand curves are shown. These demand curves result from regression equations in which Mai estimates quantity demanded as a function of price and no other variables. However, Mai recognized that other variables, such as sunshine or temperature, may affect the demand for pie. Collecting this data requires effort. In which town should collecting such data be a higher priority for Mai if she is trying to improve her ability to predict pie demand? Explain.
Figure 3.5
Transcribed Image Text:
Mai, a bakery owner, changes the price of apple demand curve in panel a, where R? = 0.98. In pie every Friday for 14 weeks to determine the panel b, where R2 = 0.54, the data points are more weekly demand curve for apple pie. The observed widely scattered around the estimated demand price-quantity data points lie close to the estimated curve. (a) R2 = 0.98 (b) R2 = 0.54 * 15 10 10 10 20 30 40 10 20 30 40 Q, Thousands of pies per month Q, Thousands of pies per month p.$ per pie p, $ per pie
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M ai should prioritize collecting data on other variables like sunshine or temperature in the town with the demand curve in Panel B R 2 0 54 This is b...View the full answer
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Managerial Economics And Strategy
ISBN: 9780134899701
3rd Edition
Authors: Jeffrey M. Perloff, James A. Brander
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