Using linear regression analysis, Empire Roofing Company estimated its demand function for flat rolled roofing and achieved the following results:
Q_R = 244 - .1057P_R + 1.35P_C + .025I
where:
Q_R = quantity in thousands of square feet per year
P_R = price in thousands per roofing job
P_C = price of a competing company's average bid in thousands)
I = average annual household income
a. How can Empire use this information to find its price, income and cross price elasticity of demand?
b. What would an R² of 0.72 indicate?
c. Can you think of a potentially important variable that Empire has ignored in its demand analysis?

Question

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The Answer of Using linear regression analysis, Empire Roofing Company estimated its demand function for flat rolled roofing and achieved the following results: Q_R = 244 - .1057P_R + 1.35P_C + .025I where: Q_R = quantity in thousands of square feet per year P_R = price in thousands per roofing job P_C = price of a competing company's average bid in thousands) I = average annual household income a. How can Empire use this information to find its price, income and cross price elasticity of demand? b. What would an R² of 0.72 indicate? c. Can you think of a potentially important variable that Empire has ignored in its demand analysis?

Using Linear Regression Analysis, Empire Roofing Company Estimated Its Demand