As the Midwest regional manager for American Airlines, you have recently undertaken a survey of economy-class load factors (the percentage of economy-class seats that are filled with paying customers) on the Chicago-Columbus, Ohio route that you service. The survey was conducted over 5 successive months. The survey results appear in the table below. Assume that all other factors have remained constant over the 5-month period:

Month	American's Price	United's Price	Monthly per capita income	American's load factor (Q)	United's load factor (Q)
1	$110	$112	$1,900	65	60
2	110	110	1,900	62	63
3	110	110	2,100	70	66
4	109	110	1,900	70	61
5	108	110	1,900	72	59

1. Based on the data you have collected, how responsive is your company's load factor on the Chicago-Columbus route to your own price, income levels, and United's price? Select appropriate months and computeelasticity values to complete the following table. How your work.

Elasticity (arc)	Value
(1) own-price elasticity of demand for American's economy class seats
(2) income elasticity of demand for American's Economy class seats.
(3) cross-price elasticity of demand for American's economy class seats with respect to United's price on the same route

Hint: Elasticity here is based on ceteris paribus conditions - all other things unchanged. This means that if the own price changes, the income, and price of competitors stay the same. In fact, there should be only one pair of consecutive months that meet the "all other things unchanged" criterion for each elasticity coefficient to be calculated, and it is a different pair of months for each one.Arc or midpoint elasticity formula appears on pg 56 of the text (where it is simply called the "arc")The formula is the same for all three calculations.The quantity is always the change in American's load factor.The "price" is the price of American's tickets, or the income, or the price of United's tickets.

b. Are economy class tickets a normal or inferior good in the Chicago-Columbus market? Explain.

c. How close a competitor/substitute does United appear to be in the Chicago-Columbus market? Explain.

d. Based on the survey you have undertaken, to increase your profits, should you raise your price, lower it, leave it unchanged, or is it impossible to tell without more information? (Hint: consider what will happen to total revenue and total costs if you change your price.)

e. If you had conducted your survey over a period of 5 successive years rather than over 5 successive months, would the own-price elasticity of demand for your product be larger or smaller than your estimate here? Explain.

f. You know from the readings on supply and demand that demand is made up of all the determinants for which you have calculated elasticities (price, income, cross for substitution). Which factor is the most important in determining demand? Explain how you arrived at that conclusion and why it might (or might not) make sense.

This assignment may be prepared in a question/answer format, and you may use an Excel spreadsheet to supplement.