Below is data on weekly Quantity demanded of pizza in a small town in South Georgia, prices and average household incomes.

Use the data to perform a regression analysis of price and income on quantity demanded.

a.) How well does the regression fit the data.

b.) What is the income elasticity of demand for pizza?

Quantity Price Income

1 183 29.25 30.72

2 207 30.1 37.57

3 183 30.54 29.43

4 192 28.67 37.2

5 182 30.23 35.87

6 217 29.76 35.16

7 180 31.77 27.7

8 195 31.01 32.96

9 200 29.21 32.3

10 198 30.79 36.1

11 195 29.75 32.68

12 205 29.98 37.49

13 182 30.06 31.32

14 218 28.94 38.67

15 231 29.76 34.82

16 212 27.94 42.27

17 222 30.75 40.03

18 150 28.96 30.02

19 183 30.96 34.3

20 158 29.03 29.89

21 199 30.83 35.27

22 196 30.6 33.55

23 234 29.98 40.03

24 171 29.27 29.91

25 171 31.42 33.69

26 170 29.24 31.51

27 210 27.61 30.6

28 184 30.64 34.36

29 223 29.97 37.59

30 177 31.87 31.78

31 168 30.06 27.47

32 192 28.83 40.64

33 201 30.91 36.2

34 207 29.84 38.05

35 241 29.94 39.55

36 216 30.67 35.38

37 193 31.03 40.42

38 187 28.45 37.29

39 194 30.02 29.68

40 212 30.85 40.61

41 141 30.46 28.23

42 217 28.85 36.87

43 194 29.34 36.59

44 182 30.1 29.56

45 225 28.88 36.26

46 214 30.2 34.29

47 198 28.56 41.7

48 183 29.51 30.92

49 206 29.86 31.22

50 198 30.83 32.39

1. A bond pays $1,000 at the end of each year for 5 years plus an additional $5,000 when the bond matures at the end of 5 years. What is the most you would be willing to pay for this bond if your opportunity cost of capital is 5%?

2. Suppose the own price elasticity of demand for good X is -3, its income elasticity is 2, and the cross price elasticity of demand between good X and Y is -5. Determine how much the consumption of this good will change if: a) The price of good X increases by 5% b)

The price of good Y increases by 12%

3. An accountant for a car rental company was recently asked to report the firm's cost of producing various levels of output. The accountant knows that the most recent estimate available of the firm's cost function is C(Q) = 100 + 10Q + Q2, where costs are measured in thousands of hours rented: a) What is the average fixed cost of producing 2 units of output? b) What is the average total cost of producing 2 units of output? c) What is the marginal cost of producing 2 units of output?

4. Provide an intuitive explanation for why a "buy one, get one free" deal is not the same as a "half price" sale.