Chapter A1, Problem 1PE

Develop a spreadsheet for computing the demand for any values of the input variables in the linear demand and nonlinear demand prediction models in Examples $\text{1}\text{.7 and 1}\text{.8}$ in the chapter.

To determine

To develop a spreadsheet for computing the demand for any values if the input variables in the linear demand and nonlinear demand prediction models.

Explanation of Solution

Given:

Linear model is,

  $\begin{array}{l}\text{D=a-bP,}\\ \text{Where}\\ \text{D-Demand}\\ \text{a-Constant}\\ \text{b-Slope}\\ \text{P-Price}\end{array}$

And Nonlinear model,

  $\begin{array}{l}{\text{D=cP}}^{\text{-d}}\\ \text{Where}\\ \text{D-Demand}\\ \text{c-Demand}\text{when}\text{price}\text{is}\text{0}\\ \text{P-Price}\end{array}$

Following is the formulae used in spreadsheet for linear model:

  

Following is the formulae used in spreadsheet for Nonlinear model:

  

Following is the output for linear model:

  

As per calculation, if the price increases then demand decreases.

Following is the output for Nonlinear model:

  

As per calculation, if the price increases then demand decreases.