23. Airline ticket prices are generally optimized for the air- line\'s benefit,

Question

23. Airline ticket prices are generally optimized for the air- line's benefit, not for the consumer's benefit. On July 8, 2010, at the online travel agency website http:// www.expedia.com, the following airfares were pro- posed for roundtrip travel from Seattle to Boston leaving one week later: AirTran: $721; Alaska: $787; American: $1319; Continental: $729; Delta: $520; Frontier: $661; Jet Blue: $657; U.S. Airways: $676; and United: $510. a. Compute the standard deviation, viewing these air- fares as a sample of fares that might be obtained under similar circumstances. b. Write a paragraph, interpreting the standard devi- ation and discussing variation in airline fares.

Explanation / Answer

A)
Sd =
sqrt { (Xi-Xbar)^2/(n-1) }
sqrt(56968.3611111111)
238.68

B)

Standard deviation measures the Dispersion of the data from the mean. The high value of standard deviation indicates that the mean is reliable. standard deviation measures the dispersion in true units. In this case the value of standard deviation is only 238 indicating that the mean is reliable.

Xi (Xi-Xbar)^2 721 102.23 787 3123.57 1319 345613.35 729 4.46 520 44567.90 661 4915.57 657 5492.46 676 3037.23 510 48890.12 sum 6580 455746.89 sum/n 731.1111 sum/(n-1) 56968.36

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