Estimate the arc price elasticity of demand

Assignment Help Econometrics
Reference no: EM131325211

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:

1504_c3305b32-bea7-4e56-a805-ce6144e5d456.png

a. Estimate the arc price elasticity of demand using the 2006 and 2007 data.

b. Estimate the arc income elasticity of demand using the 2006 and 2007 data.

c. Assume that these estimates are expected to remain stable during 2008. Forecast 2008 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by $40 billion. Also assume that arc income elasticity computed in (b) above is the best available estimate of income elasticity.

d. Forecast 2008 sales for Reliable given that its aircraft prices will increase by $500 from 2007 levels and that disposable personal income will increase by $40 billion. Assume that the price and income effects are independent and additive and that the arc income and price elasticities computed in parts (a) and (b) are the best available estimates of these elasticities to be used in making the forecast\

Reference no: EM131325211

Questions Cloud

What are your immediate reactions after watching video : What are your immediate reactions after watching the video? Explain.How do you think the team will be affected after this?What suggestions would you give and how would you communicate your suggestions to the leader of the team.
What does northern need to do to realize the benefits : What went wrong with the TUFS investment and what can be done to prevent these problems in the future? What does Northern need to do to realize the benefits that were projected for TUFS?
Identify the frame used by the leaders in the challenger : Identify the frame(s) used by the leaders in the Challenger and Columbia situations (i.e., Structure, HR, Political, and Symbolic). Review the choice of frames made by the management in those situations. Explain if the situation with the space shut..
Flask-shaped cylindrical structures : What arises from flask-shaped cylindrical structures known as phialides?
Estimate the arc price elasticity of demand : Assume that these estimates are expected to remain stable during 2008. Forecast 2008 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by $40 billion. Also assume ..
Apex of the conidospore : What is produced by inflation of the apex of the conidospore and later the inflated apex is separated by a septum?
What command would you use to kill a process : POS/433- When using top command, what command would you use to kill a process? If you were not using top command, what command would you use to kill a process?
Calculate the bid or offer quotations : Given the following spot quotations in London:- Calculate the following bid/offer quotations, also in London:-  CHF against AUD-  GBP against AUD.
Which is true in regard to consumer spending of money online : Which of the following is true in regard to consumer spending of money online? Online reviews and expert opinions are successful in influencing consumer purchases of what type of goods?

Reviews

Write a Review

Econometrics Questions & Answers

  What is firms profit-maximizing or loss maximizing

Average variable cost at this output level equal $15 per unit, and average fixed costs equal $5 per unit. What is the firm's profit-maximizing (or loss maximizing) output level What is the amount of its economics profits (or losses) at this outpu..

  Is demand elastic or inelastic over the price range

Danny "Dimes" Donahue is a neighborhood's 9-year old entrepreneur. His most recent venture is selling homemade brownies that he bakes himself. At a price of $1.50 each, he sells 100. At a price of $1.00 each, he sells 300.

  Identify the effect of implementing a right-to-work law

Find the average manufacturing share of employment within 25 miles of the policy border state by state in 2011.

  How is delta different from other airlines

How does the topics in Chapter 7, Chapter 8 & Chapter 9 link to this case study?

  Find the cost of equity financing for common stock

Find the cost of equity financing for common stock for the following information  Dividend in year 1 = $8, growth = 6%, floatation costs percentage of stock price = 11.4%, and the current stock price = $58.

  Determine the price and quantity at the kink of demand

The kinked demand curve in a duopoly market is defined by two equations P1 = 10.0.75 * Q P2 = 16-2 * Q Determine the price and quantity at the kink of demand curve Using the equation provide calculate and draw the MR curve

  How to recommend the economically superior system

Two types of power converters are under consideration for a specific application. An economic comparison is to be made using a MARR of 20% and the following cost estimates: Data Alpha Beta Service life (years) 5 9

  What is the price level and what is the wage

Consider an economy with the production function Y= L^(1/3) a) Derive the Labor demand Curve b) If Labor supply curve is L^s= (w/p) , calculate the equilibrium levels of real wage, labor and output.

  How might google''s search-engine dominance harm consumers

How might consumers have benefited from the merger of XM and Sirius (News, p. 229)? How might they have lost?

  Comment on the efficiency of this policy initiative

The government has announced that it intends to cut national taxes and boost spending on the national education system to reduce unemployment in the north-west. Comment on the efficiency of this policy initiative.

  A central bank buys government bonds

If a central bank buys government bonds, what happens to interest rates, aggregate demand, and GDP?  What happens to these variables if it engages in contractionary monetary policy through open market operations?

  Calculate optimal price for tlc service for marginal cost

TLC Lawn Care, Inc. provides fertilizer and weed control services to residential customers. Its seasonal services package, regularly priced at $250, includes several chemical spray treatments. As part of an effort to expand its customer base.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd