We have discussed linear and exponential trend lines. Another popular choice is a power trend line, also called a constant elasticity trend line. This trend line has the form y = a xb , and it has the...

We have discussed linear and exponential trend lines. Another popular choice is a power trend line, also called a constant elasticity trend line. This trend line has the form y = a^xb, 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 trend line 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 trend line is just another option. Estimate and interpret a power trend line for the data on demand and price of a commodity listed in the file P14_09.xlsx. In particular, if price increases by 1%, what do you expect to happen to demand? Calculate the MAPE for this power trend line. Would you say it indicates a good fit?