Question 2. Calculate the mean absolute percentage errors for power and exponential curves. Which of the three models, linear, power, or exponential, best fits the data?
Answer:
ISDS 710 Excel Model 5 - Estimating Sensitivity of Demand to Price (1) - Excel File Home Insert Page Layout Formulas Data Review View Smart View ? Tell me what you want to do... Sign in _ AutoSum 6 Cut Calibri - 11 - A" A" = Wrap Text General AY O BB Copy - Fill - Cell Sort & Find & Paste BIU - B. DA. === Merge & Center $ ~ % " 08 428 Conditional Format as nsert Delete Format Format Painter Formatting ~ Table~ Styles Clear - Filter - Select Cells Editing Clipboard Font Alignment Number Styles F25 X D E F G H K M N o P Q R S U Estimating Sensitivity of Demand to Price 2 Month Price Demand 3 $450 4500 The Links Company sells its golf clubs at golf outlet stores throughout the United States. The company knows $300 10300 that demand for its clubs varies considerably with price. In fact, the price has varied over the past 12 months, 5 $440 4900 and the demand at each price level has been observed. For example, during month 12, when the price was UA W N $360 8600 $390, 6800 sets of clubs were sold. The company wants to estimate the relationship between demand and 12500 price and then use this estimated relationship to answer the following questions: $290 8 $450 5200 1. Assuming the unit cost of producing a set of clubs is $250 and the price must be a multiple of $10, what 9 $340 8700 price should Links charge to maximize its profit? 10 00 $370 6800 2. How does the best price change as the unit cost of producing a set of clubs changes? 11 9 $500 4500 12 10 $490 4400 13 11 $430 5800 Trendlines 14 12 $390 6800 15 Linear: y = a + bx 16 A linear function represents a straight line When x changes by 1 unit, y changes by b units 17 Trendline Parameters Prediction Absolute Percentage Error The constant o is called the intercept, and b is called the slope 18 Linear Linear Linea 19 Intercept Power: y = ax* 20 Slope A power function represents a curve except in the special case where the exponentb = 1 21 Power Assuming that a is positive, the shape of the curve depnds on the the exponentb 22 Constant f b > 1, y increases at an increasing rate as x increases 23 If 0 ) 12/1/2021 DELLISDS 710 Excel Model 5 - Estimating Sensitivity of Demand to Price (1) - Excel Home Insert Page Layout Formulas Data Review View Smart View ? Tell me what you want to do... Calibri 11 - A" A" Wrap Text General EX AutoSum - IN opy Fill - BIU - -D-A- E Merge & Center Conditional Format as Cell Insert Delete Format Sort & ormat Painter Formatting ~ Table - Styles Clear Filter ard Font Alignment Number Styles Cells Editing X LL I N O P R S Exponential: y = qebx The exponential function also represents a curve also represents a curver whose shape depends onb Assuming a is positive... If b > 0, y increases as x increases MAPE If b
