then adjust the number of planes to carry the necessary total number
of passengers.)
c. Use your spreadsheet’s optimizer to confirm the optimal solution.
(Hint:Be sure to list cell E2 as an adjustable cell.)Suggested References
The following references illustrate the various uses of demand analysis, including the computation and appli-
cation of elasticities.
Baye, M. R., D. W. Jansen, and J. W. Lee. “Advertising Effects in Complete Demand Systems.”
Applied Economics24 (1992): 1087–1096.
Becker, G. S., M. Grossman, and K. M. Murphy. “An Empirical Analysis of Cigarette Addiction.” The
American Economic Review84 (June 1994): 396–418.
Bordley, R. F. “Estimating Automotive Elasticities from Segment Elasticities and First Choice/
Second Choice Data.” The Review of Economics and Statistics75 (August 1993): 455–462.
J. Fogarty. “The Demand for Beer, Wine, and Spirits.” AAWE, Working Paper 31 (November 2008).
Hughes, J. E., C. R. Knittel, and D. Sperling. “Evidence of a Shift in the Short-Run Price Elasticity
of Gasoline Demand.” Working Paper 12530, National Bureau of Economic Research, September
2006.
Hunt-McCool, J., B. F. Kiker, and Y. C. Ng. “Estimates of the Demand for Medical Care under Dif-
ferent Functional Forms.” Journal of Applied Econometrics9 (1994): 201–218.
McCarthy, P. S. “Market Price and Income Elasticities of New Vehicles Demand.” Review of Eco-
nomics and Statistics78 (August 1996): 543–547.
Pagoulatos, E. and R. Sorenson, “What Determines the Elasticity of Industry Demand?” Interna-
tional Journal of Industrial Organization4 (1986): 237–250.
Schaller, B. “Elasticities for Taxicab Fares and Service Availability.” Transportation26 (August 1999):
283–297.
Silk, J. I., and F. L. Joutz. “Short- and Long-Run Elasticities in U.S. Residential Electricity Demand:
A Co-integration Approach.” Energy Economics19 (October 1997): 493–513.
Subramanian, S., and A. Deaton. “The Demand for Food and Calories,” The Journal of Political Econ-
omy104 (February 1996): 133–162.
The following references contain discussions of optimal pricing, price discrimination, and advertising.
“The Price Is Right, but Maybe It’s not and How Do You Know?” Knowledge@Wharton(October 3,
2007), http://knowledge.wharton.upenn.edu/article.cfm?articleid1813.
Anderson, J. C., M. Wouters, and W. Van Rossum, “Why the Highest Price Isn’t the Best Price,”
Sloan Management Review(Winter 2010): 67–76.
Knetter, M. M. “International Comparisons of Pricing-to-Market Behavior.” The American Economic
Review83 (June 1993): 473–486.
Leavitt, S. D. “An Economist Sells Bagels: A Case Study in Profit Maximization.” Working Paper
12152, National Bureau of Economic Research, March 2006.
Tirole, J. The Theory of Industrial Organization.Chapters 2 and 3. Cambridge, MA.: MIT Press, 1989.
Van Dalen, J., and R. Thurik. “A Model of Pricing Behavior: An Econometric Case Study.” Journal
of Economic Behavior and Organization36 (August 1998): 177–195.
Demand characteristics and selling strategies for information goods and services are analyzed in:
Shapiro, C., and H. Varian. Information Rules, Chapters. 1–3, 7. Boston: Harvard Business School
Press, 1999, and at the associated Web site, http://www.inforules.com.118 Chapter 3 Demand Analysis and Optimal Pricingc03DemandAnalysisAndOptimalPricing.qxd 8/18/11 6:48 PM Page 118