The Reliable Aircraft Company manufactures small, pleasure-use aircraft. Based on past experience, sales volume appears to be affected by changesin the price of the planes and by the state of the economy as measured by consumers' disposable personal income. The following data pertaining toReliable's aircraft sales, selling prices, and consumers' personal income were collected:Year Aircraft Sales20062007200800.22-0.38-0.22The arc price elasticity of demand between 2006 and 2007 is:-8.11-3.535253.534500400The arc income elasticity of demand between 2007 and 2008 is:Average Price(Dollars)16,8008,0008,000Disposable Constant Income(In constant 2006 dollars, billions)610610Aircraft Sales 2009 Forecast:Assume that these estimates are expected to remain stable during 2009. Forecast 2009 sales for Reliable assuming that its aircraft prices remainconstant at 2007 levels and that disposable personal income will increase by 7%. Also assume that the arc income elasticity you just computed is thebest available estimate of income elasticity.Aircraft Sales 2009 Forecast:590Forecast 2009 sales for Reliable given that its aircraft prices will increase by 6% from 2008 levels and that disposable personal income will increase by7%. Assume that the price and income effects are independent and additive and that the arc income and price elasticities you just computed are thebest available estimates of these elasticities to be used in making the forecast.

In the economy, the income level of the supplier depends on the market price level as well as the…

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.

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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
0
0.22
-0.38
-0.22
The arc price elasticity of demand between 2006 and 2007 is:
-8.11
-3.53
525
3.53
450
0
400
The arc income elasticity of demand between 2007 and 2008 is:
Average Price
(Dollars)
16,800
8,000
8,000
Disposable Constant Income
(In constant 2006 dollars, billions)
610
610
Aircraft Sales 2009 Forecast:
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.
Aircraft Sales 2009 Forecast:
590
Forecast 2009 sales for Reliable given that its aircraft prices will increase by 6% from 2008 levels and that disposable personal income will increase by
7%. Assume that the price and income effects are independent and additive and that the arc income and price elasticities you just computed are the
best available estimates of these elasticities to be used in making the forecast.

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