Estimating Sensitivity of Demand to Price

The Links Company sells its golf clubs at golf outlet stores throughout the United States. The company knows that demand for its clubs varies considerably with price. In fact, the price has varied over the past 12 months, and the demand at each price level has been observed. For example, during month 12, when the price was $390, 6800 sets of clubs were sold. The company wants to estimate the relationship between demand and price and then use this estimated relationship to answer the following questions:

Month	Price	Demand
1	$450	4500
2	$300	10300
3	$440	4900
4	$360	8600
5	$290	12500
6	$450	5200
7	$340	8700
8	$370	6800
9	$500	4500
10	$490	4400
11	$430	5800
12	$390	6800

Question 1. As the unit cost of production increases, does profit become more sensitive or less sensitive to changes in unit cost?

Question 2. Calculate the mean absolute percentage errors for power and exponential curves. Which of the three models best fits the data: linear, power, or exponential?

Question 3. What is the best price and maximum profit predicted by the power model assuming the unit cost of product is $250? Hint: On sheet 2, you will need to update the parameters for the best fitting trendline and the formula used to calculate demand.

(You have to find the mean absolute percentage errors for linear, power, and exponential within excel to find your answers).