Getaway Tours, Inc., has estimated the following multiplicative demand function for packaged holiday tours in the East Lansing, Michigan, market using quarterly data covering the past four years (16 observations):

R2 = 80%, Standard Error of the Estimate = 20

Here, By is the quantity of tours sold, Pie is average tour price, Pox is average price for some other good, Ay is tour advertising, Ax is advertising of some other good, and I is per capita disposable income. The standard errors of the exponents in the preceding multiplicative demand function are

A. Is tour demand elastic with respect to price?

B. Are tours a normal good?

C. Is X a complement good or substitute good?

D. Given your answer to part C, can you explain why the demand effects of Ay and Ax are bothpositive?

Transcribed Image Text:

By = 10 p; 1°PAA?³I\85 25 1.85 %3D