Homework 5. Data Analysis Exercise. Demand for airline tickets

ECO285

This goal of the data analysis exercise is to estimate demand for airline tickets. The file airline demand.xls contains information on ticket prices and tickets sales along an air route. The variables in the data set are:

- Quarter- Time period, quarter.

- Quantity- The per-flight average number of seats sold. This is quantity demanded

- Price- The per-flight average price of the ticket.

1.(4 points) Preliminary analysis of the data using excel.

a.(2 points) Construct a scatter-plot diagram of quantity as a function of price. Add a linear trend line and display the equation on chart. COPY THE SCATTER PLOT HERE.

b.(1 point) What coefficient indicates the effect of price on quantity demanded? WRITE THE VALUE HERE

a.(1 point) What effect does price have on quantity demanded?EXPLAIN

2.(11 points) Regression analysis of the demand using EXCEL.

a.(3 points) Run a linear regression to estimate the effect of price on quantity demanded, controlling for the time period. (NOTE: to control for the time period you have to include the variable Quarter among the independent variables).

b.(1 point) What coefficient indicates the effect of the price on the quantity demanded? WRITE THE VALUE HERE

c.(1 point) Is this coefficient significant? YES or NO, EXPLAIN.

d.(1 point) What effect does price have on quantity demanded? EXPLAIN

e.(1 point) Construct the own-price elasticity of demand for airline tickets.

f.(1 point) What is the own-price elasticity of demand airline tickets? WRITE THE VALUE HERE.

g.(1 point) What is the interpretation of the own-price elasticity of demand for airline tickets?

h.(1 point) What is the predicted quantity for a company charging the average price in the next quarter (quarter 17)

i.(1 point) If the company raises the price by 10% what do you predict will happen to the revenue? EXPLAIN