a) Estimate a linear demand function for tropical cream. Use the Regression Data Analysis on Excel. Show your regression output. State whether the coefficients on the two prices are statistically significantly different from zero at the 5% significance level and explain how you know that. What is the R2?
b) Use the estimated demand function from part a) and assume that the price of green mango ice cream is held constant at $7.00. Determine the point price elasticity of demand for tropical cream ice cream if its price is $10? What is the arc price elasticity of demand if the price of tropical cream ice cream falls from $10 to $9? Draw the estimated demand curve for tropical cream ice cream and illustrate the region of the demand curve for which demand is elastic.