The Eastern Shuttle, Inc., is a regional airline providing shuttle service between New York and Washington, D.C. An analysis of the monthly demand for service has revealed the following demand relation:
Q = 26,000 - 500P - 250POG + 200IB - 5,000S,
where Q is quantity measured by the number of passengers per month, P is price ($), POG is a regional price index for other consumer goods (1967 = 1.00), IB is an index of business activity, and S, a binary or dummy variable, equals 1 in summer months and 0 otherwise.
A. Determine the demand curve facing the airline during the winter month of January if POG = 4 and IB = 250.
B. Determine the demand curve facing the airline, quantity demanded, and total revenues during the summer month of July if P = $100 and all other price-related and business activity variables are as specified previously.

  • CreatedFebruary 13, 2015
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