If Excel estimates the demand function for a product to be: Q^d = 1,500 - (5 × P)and the actual quantity demanded is 850 when a price of $125 is charged, the estimated residual is 25.

Question

Quizplus · Accepted Answer

To calculate the residual, we first need to calculate the predicted quantity demanded at a price of $125 using the demand function: Q^d = 1,500 - (5 × 125) = 875 The actual quantity demanded is given as 850, so the residual is: Residual = Actual Quantity Demanded - Predicted Quantity Demanded Residual = 850 - 875 = -25 Therefore, the estimated residual is -25, not 25. Hence, the statement is False.

If Excel Estimates the Demand Function for a Product to Be