Using linear regression analysis, Tim's Home Supply Company estimated its demand function for paint with the following results. Where: Q_P = Gallons of paint sold per year at Tim's P_P = price per gallon of paint P_W = price of wallpaper Y = Average annual household income Given the above information: A) when income rises, people will buy more wallpaper B) when income decreases, people will buy more paint C) when income rises, people will buy more paint D) paint and wallpaper are complementary goods E) none of the above

Question

Quizplus · Accepted Answer

The demand function for paint suggests that as income (Y) increases, the quantity of paint sold (Q_P) also increases. This indicates that paint is a normal good, and people tend to buy more of it as their income rises. There is no information in the analysis that suggests people will buy more wallpaper as income increases or that paint and wallpaper are complementary goods.

Using Linear Regression Analysis, Tim's Home Supply Company Estimated Its