The Pilot Pen Company has decided to use 15 test markets to examine the sensitivity of demand for its new product to various prices, as shown in the following table. Advertising effort was identical in each market. Each market had approximately the same level of business activity and population.

Complete the following worksheet and then estimate the demand function for Pilot's new pen using a linear regression model.

Test Market	Price Charged	Quantity Sold
	(cents)	(Thousands of Pens)
ii	xixi	yiyi	xixiyiyi	xi2xi2	yi2yi2
1	50	20	1,000	2,500	400
2	50	21	1,050	2,500	441
3	55	19	1,045	3,025	361
4	55	19.5	1,072.5	3,025	380.25
5	60	19.5	1,170	3,600	380.25
6	60	19	1,140	3,600	361
7	65	15.5	1,007.5	4,225	240.25
8	65	15	975	4,225	225
9	70	14.5	1,015	4,900	210.25
10	70	15.5	1,085	4,900	240.25
11	80	13	1,040	6,400	169
12	80	14	1,120	6,400	196
13	90	11.5	1,035	8,100	132.25
14	90	11	990	8,100	121
15	40	17	680	1,600	289
Total	980	245		67,100

Regression Parameters	Estimations
Slope ()
Intercept ()

What is the standard error of the estimate (sese)?

1.635

1.346

104.658

What is the estimate of the standard deviation of the estimated slope (sbsb)?

0.024

0.029

1.888

Can you reject the hypothesis (at the 0.05 level of significance) that there is no relationship (i.e., =0=0) between the price and quantity variables? (Hint: t0.025,13=2.16t0.025,13=2.16)

No

Yes

Complete the following worksheet and then use it to calculate the coefficient of determination.

ii	xixi	yiyi	yy^	(yiy)2y^iy2	(yiy)2yiy2
1	50	20	19.248	8.495	13.444
2	50	21	19.248	8.495	21.778
3	55	19	18.303	3.880	7.111
4	55	19.5	18.303	3.880	10.028
5	60	19.5	17.358	1.050	10.028
6	60	19	17.358	1.050	7.111
7	65	15.5	16.413	0.006	0.694
8	65	15	16.413	0.006	1.778
9	70	14.5	15.468	0.749	3.361
10	70	15.5	15.468	0.749	0.694
11	80	13	13.578	7.592	11.111
12	80	14	13.578	7.592	5.444
13	90	11.5	11.688	21.579	23.361
14	90	11	11.688	21.579	28.444
15	40	17	21.138	23.085	0.444
			Total

The coefficient of determination (r2r2) is

What is the price elasticity of demand at a price of 50 cents?

-0.02

-0.46

0.03

-0.50