The Following Data Show the Demand for an Airline Ticket

question 107

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. Assuming that the sample correlation coefficient between Demand and = exp(26.3660 - 3.2577 ln(Price) + (0.2071) ²/2) is 0.956, what is the predicted demand for a price of $250 found by the model with better fit?

• A) 4,447.88
• B) 3,914.38
• C) 4,029.38
• D) 5,175.09

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Definitions:

Inventory

The total amount of goods a company holds in stock, including raw materials, work-in-progress, and finished goods.

Variable Costing

An accounting method that only assigns variable costs to inventory, considering fixed costs as period expenses.

Absorption Costing

An accounting method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed overhead - as part of the cost of a product.

Variable Production Costs

Costs that change in direct proportion to changes in the level of production, such as raw materials and hourly labor.