We discussed linear and exponential trendlines. Another popular choice is a power trendline, also called a constant elasticity trendline. This trendline has the form y = ax b , and it has the property...

We discussed linear and exponential trendlines. Another popular choice is a power trendline, also called a constant elasticity trendline. This trendline has the form y = ax^b
, and it has the property that when x increases by 1%, y changes by a constant percentage. In fact, this constant percentage is approximately equal to the exponent b (which could be positive or negative).


The power trendline is often cited in the economics literature, where, for example, x might be price and y might be demand. Fortunately, it can be found through Excel’s Trendline tool; the power trendline is just another option. Estimate and interpret a power trendline for the data on demand and price of some commodity listed in the file P16_09.xlsx. In particular, if price increases by 1%, what do you expect to happen to demand? Calculate the MAPE for this power trendline. Would you say it provides a good fit?