Regression Analysis Example
Jaap de Jonge, Management Consultant, Netherlands
Hi Vanessa, let's suppose this formula is for daily demand of apples and P in the formula represents pears.
This formula says that each day there is a demand of apples of 120, minus the demand of peers times 1.8.
For example if people want to buy 50 pears on a particular day, then the remaining demand for apples would be 120 - 1.8 * 50 = 120 - 90 = 30.
What could a manager do with this fomula? Well a number of things. Suppose (s)he knows that for one day there will be a very high demand for pears, say 100, he will now that he will be unable to sell any apples, so best not to build any stock of apples for that day.
In general it would be good for the manager to know / measure P, because then he also knows Q.
Note that if his demand formula is correct, there are no other variables (influences) on the demand for apples than P. So the manager should not spend any effort on any other things than P.
Hope this helps.