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 = 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%.

Question

Quizplus · Accepted Answer

The slope of the obtained log-log regression equation signifies the percentage change in demand for a 1% change in price. As the coefficient of ln(Price) is negative (-3.2577), it implies that for every 1% increase in the price, the predicted demand will decline by approximately 3.2577%. Hence, option A is the correct answer.

The Following Data Show the Demand for an Airline Ticket