Scatter Plot for Price vs Demand — Price Elasticity & Demand Curve
A price-versus-demand scatter plot charts observed unit sales volume against price points and fits a downward-sloping OLS demand curve ($\hat{Q} = mP + b,\; m < 0$) to estimate price sensitivity.
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Linear Demand: Q = m*P + b (where m = dQ/dP < 0). Point Price Elasticity of Demand: E_d = (dQ / dP) * (P / Q) = m * (P / Q). Revenue-maximizing price: P* = -b / (2*m).
Chart Design & Use-Case Tips
- 01Linear Demand: Q = m*P + b (where m = dQ/dP < 0). Point Price Elasticity of Demand: E_d = (dQ / dP) * (P / Q) = m * (P / Q). Revenue-maximizing price: P* = -b / (2*m).
- 02Enter Unit Price ($P$) in Series A and Quantity Sold ($Q$) in Series B.
- 03Notice the negative slope $m$ on the OLS regression line—each $1 increase in price reduces quantity demanded by $|m|$ units.
- 04Revenue at any price point is $R = P \times Q$; the revenue-maximizing price under a linear demand curve $Q = b + mP$ (with $m < 0$) occurs at $P^* = -b / (2m)$.
Frequently Asked Questions
Why is the regression slope negative on a Price vs. Demand chart?+
By the Law of Demand, higher prices reduce quantity demanded, producing a downward-sloping regression line (m < 0) for normal goods.
How do I find the revenue-maximizing price from the regression equation?+
Read the intercept b and negative slope m from the chart header. Total revenue R(P) = P*(mP + b) is maximized at P* = -b / (2m). In the default dataset, P* is roughly $49–$52.
What does it mean if elasticity |E_d| is less than 1?+
When |E_d| < 1, demand is inelastic—raising prices increases total revenue because unit drop-off is proportionally smaller than the price increase.