Exhibit 16.5.The following data shows 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: Refer to Exhibit 16.5.What does the slope of the obtained regression equation 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%.

Question

Quizplus · Accepted Answer

The slope of the regression equation obtained from the log-log regression model signifies the percentage change in demand for a 1% increase in price. In this case, the slope is -3.2577%, which means that for every 1% increase in price, the predicted demand declines by approximately 3.2577%.