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 2006 2007 2008 Oo 0.22 -0.38 The arc price elasticity of demand between 2006 and 2007 is: O -0.22 O-8.11 -3.53 525 450 3.53 400 The arc income elasticity of demand between 2007 and 2008 is: Oo Average Price (Dollars) 16,800 8,000 8,000 Disposable Constant Income (In constant 2006 dollars, billions) 610 610 590 Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income elasticity you just computed is the best available estimate of income elasticity.
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 2006 2007 2008 Oo 0.22 -0.38 The arc price elasticity of demand between 2006 and 2007 is: O -0.22 O-8.11 -3.53 525 450 3.53 400 The arc income elasticity of demand between 2007 and 2008 is: Oo Average Price (Dollars) 16,800 8,000 8,000 Disposable Constant Income (In constant 2006 dollars, billions) 610 610 590 Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remain constant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income elasticity you just computed is the best available estimate of income elasticity.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter3: Demand Analysis
Section: Chapter Questions
Problem 10E
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