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 regression equation ln(Demand)= β₀ + β₁ln(Price)+ ε, we can substitute the value of Price as $200 and compute the predicted demand as follows: ln(Demand) = 5.984137 + (-2.936726)*ln(200) = -0.164336 Demand = exp(ln(Demand))= exp(-0.164336) = 9201.45 (Approximately) Therefore, the predicted demand when the price is $200 is 9,201.45.

The Following Data Show the Demand for an Airline Ticket