A regression analysis between demand (y in 1000 units) and price (x in $) resulted in the following equation: estimated Y = 9 - 5x.This equation implies that if the price is increased by $1, the demand is expected to
A)increase by 9000-5000 = 4000 units
B)decrease by 9000 units
C)decrease by 9000 + 5000 = 14,000 units
D)decrease by 5,000 units
E)none of the above

Question

Quizplus · Accepted Answer

The coefficient of x (-5) indicates the change in demand for every $1 increase in price. Thus, if the price increases by $1, the demand is expected to decrease by 5,000 units (since the demand is measured in 1000 units, -5 translates to -5,000 units).

A Regression Analysis Between Demand (Y in 1000 Units) and Price