# Transportation Economics Questions

Please see the attached files.

1. Use the data from the table to estimate a demand equation for Union Atlantic rail service using regression analysis. Round the coefficients you obtain from the regression equation to the nearest whole number (e: 10.56 rounds to 11). Use your regression results to answer the following questions.

2. a. For 2005, calculate the income elasticity using the values for shipper profits and quantity of Union Atlantic rail service from the table.

b. Is consumption of Union Atlantic rail service sensitive to changes in shipper profits or not very sensitive to changes in shipper profits?

c. Is Union Atlantic rail service a normal or inferior good?

3. a. For 2003, calculate the cross price elasticity using the values for Edfex price and the quantity of Union Atlantic rail service from the table.

b. If the price of Edfex trucking increased by 10%, by what percent would consumption of Union Atlantic rail service change, and would this change be an increase or a decrease?

c. In this market, are Union Atlantic rail and Edfex trucking substitutes (competitors) or complements?

4. a. For 2006, calculate the advertising elasticity using the values for advertising expenditure and quantity of Union Atlantic rail service from the table.

b. If advertising expenditures increased by 20%, by what percent would consumption of Union Atlantic rail service change by, and would this change be an increase or a decrease?

5. a. Forecast the consumption of Union Atlantic rail service in 2010 if Union Atlantic's price rises to $6.25/ton-mile, advertising expenditures rise to $11 million, the price of Edfex rises to $4.50/ton-mile, shipper profits rise to $42 billion, and the number of shippers rises to 2700. Don't forget to put in the appropriate number for the Time variable.

6. a. Plot the demand curve for 2004 and 2007 on the same graph. Use the estimated values for the quantity of Union Atlantic rail service (calculated from the demand equation) rather than the actual values from the table.

b. The quantity of Union Atlantic rail service decreased from 2004 to 2007. Does this mean that demand decreased from 2004 to 2007? Explain.

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#### Solution Summary

Using step by step equations and regression, this solution provides answers for the various demand estimation equations.