Business Economics

1) You are the manager of a large automobile dealership who wants to learn more about the

effectiveness of various discounts offered to customers over the past 14 months. Following are the

average negotiated prices for each month and the quantities sold of a basic model (adjusted for various

options) over this period of time.

Month Price Quantity

January $12,500 15

February $12,200 17

March $11,900 16

April $12,000 18

May $11,800 20

June $12,500 18

July $11,700 22

August $12,100 15

September $11,400 22

October $11,400 25

November $11,200 24

December $11,000 30

January $10,800 25

February $10,000 28

a. Based on the demand equation estimated, explain the regression results. What do the regression

results indicate about the desirability of discounting the price?

Variable Coefficient Std. Error T-Stat. 2-Tail Sig.

C 91.322086 11.404689 8.0074157 0.000

Price -0.0060524 0.0009809 -6.1701311 0.000

R-squared 0.760338 Mean of dependent var 21.07143

Adjusted R-squared 0.740366 S.D. of dependent var 4.843144

S.E. of regression 2.467789 Sum of squared resid 73.07979

Durbin-Watson stat 1.758028 F-statistic 38.07052