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3- Estimate the price elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 4- Estimate the income elasticity of demand using the 2006 and 2007 data. (Write the calculation formula)

3- Estimate the price elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 4- Estimate the income elasticity of demand using the 2006 and 2007 data. (Write the calculation formula)

Economics:
Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter1A: Appendix: Working With Graphs
Section: Chapter Questions
Problem 1E
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The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected: Year AIRCRAFT SALES AVERAGE PRICE DISPOSABLE PERSONAL INCOME 2006 525 $17,200 $610 2007 450 8,000 610 2008 400 8,000 590 Present your results in the form of a short report (maximum 1500 words) with the following elements: 1- A brief introduction to report. This should include an indication of the form of the model used, including the expected signs of the coefficients for each variable (use quality academic resources in this area, why do you think these factors affect the den 2- An analysis of each variable in the model. This should include: function). An interpretation of each estimated coefficient A discussion of whether sign of the estimated coefficient met your expectation Testing the validity of each variable using the p-value 3- Estimate the price elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 4- Estimate the income elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 5- Give a brief conclusion. Summarize why you think the model is good or not. Indicate which variables are significant and which are not. In a second paragraph, discuss which potential problems might be relevant in this case. This includes the problems they lead to and potential solutions.
Transcribed Image Text:The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changes in the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining to Reliable's aircraft sales, selling prices, and consumers' personal income were collected: Year AIRCRAFT SALES AVERAGE PRICE DISPOSABLE PERSONAL INCOME 2006 525 $17,200 $610 2007 450 8,000 610 2008 400 8,000 590 Present your results in the form of a short report (maximum 1500 words) with the following elements: 1- A brief introduction to report. This should include an indication of the form of the model used, including the expected signs of the coefficients for each variable (use quality academic resources in this area, why do you think these factors affect the den 2- An analysis of each variable in the model. This should include: function). An interpretation of each estimated coefficient A discussion of whether sign of the estimated coefficient met your expectation Testing the validity of each variable using the p-value 3- Estimate the price elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 4- Estimate the income elasticity of demand using the 2006 and 2007 data. (Write the calculation formula) 5- Give a brief conclusion. Summarize why you think the model is good or not. Indicate which variables are significant and which are not. In a second paragraph, discuss which potential problems might be relevant in this case. This includes the problems they lead to and potential solutions.
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