Answer to Question #250900 in Economics for Mark

Question

The following table shows the price and quantity sold of coffee by Abracadabra Coffee Shop over a 

period of six(6) weeks.

Weeks:. 1 2 3 4 5 6

Quantity Sold: 5 7 8 10 11 13

Price of coffee: 6 9 10 12 13 16

A student studying econometrics formulated the following model to explain the quantity sold of 

coffee per week (coffqty) as a function of the price of coffee (coffpric). 

 ln(coffqty) = β0 + β1 ln(coffpric) + u

a. Estimate the parameters β0 and β1 of the above model by OLS. Interpret the slope coefficient

b. Calculate the coefficient of determination and interpret it.

Answer 1

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