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. Using the log-log model, which of the following is the predicted demand when the price is $200? A) 10,874.92 B) 9,201.45 C) 7,849.25 D) 12,499.98

Question

Quizplus · Accepted Answer

From the log-log model we have ln(Demand) = 10.95 - 1.44ln(Price). Substituting Price = 200 we get ln(Demand) = 7.06. Therefore, Demand = e^7.06 = 9,201.45.

The Following Data Show the Demand for an Airline Ticket