Question
If we have a hypothetical demand function for air travel between two cities that looks as follows: D = 17.5 - .3P + 2.3 Ps
- If we have a hypothetical demand function for air travel between two cities that looks as follows:
D = 17.5 - .3P + 2.3 Ps + 2.7 Y where D is the demand for seats
P is the price of the seats on the airline
Ps is the price of seats on a competing airline
Y is the per capita income in the region
Explain why we expect results in the form of this hypothetical demand function. Explain the concepts of Demand in Price Elasticity, Income Elasticity and Cross Elasticity.
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Macroeconomics
Authors: Andrew B. Abel, Ben S. Bernanke, Dean Croushore, Ronald D. Kneebone
8th Canadian Edition
134646355, 9780134842615 , 978-0134646350
