3.1 Bret’s Accounting & Tax Services is a small but locally well-known accounting firm in Sioux City, IA, that completes taxes for individuals.

Every year firms like Bret’s decide how much they will charge to complete and file an individual tax return. This price determines how many tax returns firms complete each year.

Suppose that you are an office manager for a firm like Bret’s Accounting & Tax Services and you are trying to determine what your firm should charge next year for tax returns. Use the data provided to complete the following:

a. Graph the data using a scatter plot. Using the Insert Trendline function in Excel, determine whether you should use linear or log-linear regression. (Place the graph beneath the data;

be sure to label both axes.)

b. Using Excel’s Regression Analysis function, run a regression, and answer the following questions about your output. (Place your regression results beneath the graph from part a.)

c. What is your estimated demand function?

(Round the estimated coefficients to two decimal places.)

d. What is the R2? (Report this as a percentage;

round to two decimal places.)

e. Based on the R2, do you think this regression can be used for analysis?

f. How many returns do you expect to be completed if the firm charges $85 per return?

g. What is the elasticity at this point on the demand curve?
h. At this price, are you on the elastic, inelastic, or unit-elastic portion of your demand curve?
i. Do you recommend an increase, a decrease, or no change in the price with this information?

Transcribed Image Text:

A B 1 Return Price Returns Completed 55 234 70 932 70 932 75 910 75 920 6 80 876 7 80 852 8 85 811 9 80 857 10 80 847 11 80 865 12 90 785 13 90 802 14 95 789 15 95 731 16 100 663 17 100 709 18 90 771 19 90 792 20 85 831 21 80 834 22