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Regression Statistics
Multiple R 0.83386432
R Square 0.695329704
Adjusted R Square 0.670458659
Standard Error 723.5614066
Observations 54
Coefficients
Intercept 5024.575292
own_price -136.6167655
compe_price 117.4077915
inc_per_capita -0.28234393
pro_exp 7.865084742
PED Slope*P/Q
Slope -136.62 (From the demand function)
P 91.38
Q 13,256
91.38
PED = 136.6167 X 13,256 = 0.94175
When the demand is inelastic (0<PED<1) . The price changes doesn’t have any impact on the
quantity demanded.
The mustard oil is an inferior good(IED<0). When the income is increasing the consumer tends
to avoid these goods.
Total Revenue can be maximized at a point at which there is unit elasticity, i.e. PED = 1
TR -> PQ
Q =25503.7413-136.62P
Multiplying P on both sides
TR =25503.7413P-136.62(P^2)
Scenario 2 :
6% increase in the competitor's price
P 89.81509758
When the competitor increases the price, the company shall benefit if we decrease the price as
total revenue increases by Rs. 69,210
Quantity Total
Price Demanded Revenue
93.3382
4 12,752 1,190,237
DD
94
93.5
93
92.5
92
91.5
91
90.5
90
89.5
12,600 12,800 13,000 13,200 13,400 13,600 13,800 14,000 14,200