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I am attempting to compute the price elasticity of a good with the help of a time series, and am unsure whether to correct the prices for inflation. Is there a standard argument for one or the other option? I would also be grateful for a reference.

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    $\begingroup$ Elasticities are partial derivatives -- so to estimate them you need to hold all other factors fixed! That would include the prices of other goods $\endgroup$ – user17900 Jan 15 at 14:52
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    $\begingroup$ @afreelunch this deserves a shot at credit for being the answer, because it is. :) $\endgroup$ – heh Jan 15 at 18:00
  • $\begingroup$ @afreelunch Concise and understandable. I would accept this as an answer if you wish to post it as such. $\endgroup$ – Anthony Jan 16 at 8:44
  • $\begingroup$ @Anthony OK, will do! $\endgroup$ – user17900 Jan 16 at 11:22
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Elasticities are partial derivatives -- so to estimate them you need to hold all other factors fixed! That would include the prices of other goods.

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