This question is based on airline data collected from routes in the U.S. for the

Question

This question is based on airline data collected from routes in the U.S. for the year 2000.

You are interested in examining the determinants of ticket prices. You decide to generate a scatter diagram to visually assess if the average one-way fare for a route is related to the distance of that route.

Based on this scatter diagram, would OLS be BLUE if we ran a regression of the average one-way fare for a route on the distance of that route? Explain why or why not and if this would affect any estimated coefficients.

Explanation / Answer

Yes, the OLS will be blue.We can see that the average one way fare is increasins as the distance is increasing

Hence there would be a positive correlation between the both. If a regression is fit we will get a positive coefficient with a positive intercept as well in the regression line. There is no problem at all to use the regression fit for this data from the graphexcept for some outliers at the top of the graph

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