The Following Data Show the Demand for an Airline Ticket

question 26

Multiple Choice

The following data show the demand for an airline ticket dependent on the price of this ticket. For the assumed cubic and log-log regression models, Demand = β₀ + β₁Price + β₂Price² + β₃Price³ + ε and ln(Demand) = β₀ + β₁ln(Price) + ε, the following regression results are available. Which of the following does the slope of the obtained log-log regression equation ln ( ) = 26.3660 - 3.2577 ln(Price) signify?

• A) For every 1% increase in the price, the predicted demand declines by approximately 3.2577%.
• B) For every 1% increase in the demand, the expected price increases by approximately 3.2577%.
• C) For every 1% increase in the demand, the expected price decreases by approximately 3.2577%.
• D) For every 1% increase in the price, the predicted demand increases by approximately 3.2577%.

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Definitions:

Discrete Probability

The probability of an outcome occurring when the set of possible outcomes is countable and each outcome has a distinct probability.

Probability Function

A function, denoted by f(x), that provides the probability that x assumes a particular value for a discrete random variable.

Required Condition

A necessary stipulation or prerequisite that must be met for a particular procedure, operation, or situation to proceed or be considered valid.

Binomial Probability

The probability of achieving a specific number of successes in a fixed number of independent Bernoulli trials, given a certain success probability in each trial.