1. Your company manufactures, among other things, pencil cases. Noting that sales have gone down over the past few years, you decide to see if there is possible to reverse the market trend. You raise the volume of sales as well as the price over the past few years. The results are given opposite, the comparison being made in constant dollars.

Year. Price ($). Annual sales in thousands

1982. 1.50. 35

1983 1.75. 31

1984. 1.95. 28

1985. 2.30. 24

1986. 3.00. 10

a) Graph the data.

b) Using this data, construct a model describing the relationship between price and sales volume.

c) The company wishes to dispose of what it can produce without asking workers to work overtime and without stopping his other production, i.e. 20,000 cases. What should be the price to dispose of the production ?

d) Calculate the correlation coefficient. What does this coefficient tell you?