Questions tagged [elasticity]
Elasticity is the measurement of how responsive an economic variable is to a change in another.
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Monopoly profit maximisation strategy
In this question, I used the inverse pricing formula to solve it:
P-MC/P =1/-PED. If MC is 0, then P/P gives one and on the right hand side 1/--1.8 will just give 5/9. How does this information help ...
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Deducing price elasticity of demand without price and quantity
How can the answers for these 3 questions in the link be deduced if no information is given about the price and quantity? P and Q are required to work out PED, XPED and YED. So I don't quite get how ...
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Engel’s Coefficient Data
Does anyone know of any good data sources where we can find Engel’s Coefficients by nation?
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59 views
If $X$ is a Giffen good then $Y$ must be a normal good
While going through some problems as part of self-study I encountered the following True/False question:
Q. Steven only consumes two goods: $X$ and $Y$. If $X$ is a Giffen good for Steven, then $Y$ ...
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27 views
Homogeneity in Marshallian demand function
I have worked out the expenditure function for a Marshallian demand function, R represents a fixed cost and the questions asks about why the expenditure function is unusual.
The answer explains it is ...
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1answer
39 views
How does one do a hypothesis test for elasticity?
Given the regression output
$$\widehat{\ln cons} = \underset{(0.6018)}{0.4054} + \underset{(0.0744)}{1.2739}\, \ln m - \underset{(0.1902)}{0.6666}\, \ln p_1 -\underset{(0.2645)}{1.6146}\, \ln p_2$$
...
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Can there be a good which has both Hicksian and Marshallian demand curves vertical?
Consider a perfectly inelastic (Marshallian) demand curve for a good X. Does this good also have a vertical Hicksian demand curve?
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Unitary Elasticity Of Demand Question (PED=1) [duplicate]
So I was having a bit of trouble reasoning with the answer for this particular PED question. It goes like this:
PED=1, Quantity Demanded=4,000 units when Price=$12
The question was:
Find the price ...
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1answer
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77 views
Elasticity when the demand function is given
Given the demand function, $ q = kp^{-\epsilon} $, how do I calculate the elasticity? As a result, I do know that the elasticity when the demand function is in this form is $ - \epsilon $. But I'd ...
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How to calculate Store/Category level Price elasticity?
I would like to compare different retail stores at category level using the percentage change in the category volume produced by a uniform 1% increase in the prices of all items in the category. What ...
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1answer
35 views
How to Calculate Price Elasticity of Demand When Perfectly Elastic?
When we have perfect elasticity, the demand curve is a horizontal line and the elasticity of demand coefficient is equal to infinity.
How do we arrive at a solution equal to infinity?
We know that
...
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Exploratory analysis about elasticity
I have been asked to perform some studies about the price elasticity of demand of an online seller.
The concept of elasticity used by economists are more clear to me after some
research on ...
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0answers
42 views
Elasticity of employment in respect of reduction of working time
If elasticity of employment in respect to working hours is positive then work time reduction decreases employment and the opposite is true if elasticity is negative?
I mean if I want to see how ...
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0answers
24 views
Calculating Demand curve function from Elasticity of demand, price per quantity and quantity purchased?
For an assignment I have to model the demand function and find consumer surplus based upon elasticity of demand, price per quantity and quantity purchased. Ill copy and paste the assignment below and ...
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1answer
35 views
Demand Curve Price not perfectly elastic
I'm trying to make the argument that our Sales go up when prices for all our Products are 30% off. Which I believe should be our new Regular Price. but our Demand Curve doesn't support this. Should I ...
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Increase of price of good and effect on elasticity of demand
Price elasticity of demand of good A is 1.20. If we increase a price by 15% what will happen to quantity demanded of good A?
My answer is 18% increase since % change in Q = 1.20 * %change P
Is this a ...
2
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1answer
36 views
What's an example of a resource, raw material that has become scarce?
I'm interested in the elasticity price demand that predicts that as a resource becomes more scarce, it gets more expensive.
Regarding oil price this isn't clear. Is there an example of a resource ...
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1answer
53 views
Should Company B enter the market in the following cases
Say Company A has a monopoly producing product E, at a constant marginal cost of $3$ USD. Say the ideal number of units produced is $1$ unit which produces a profit of $2$ USD (=$P_{A}$).
Next, ...
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Is there a possibility to have an inferior good (x) in a utility function where x & y have 0 cross elasticity?
A question I got on an exam that I think I messed up on:
If we have cross elasticity of 0 (x & y are independent), can x be an inferior good? I answered with a yes. Am I wrong?
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15 views
How to do elasticity modeling for products where there is slab pricing like electricity?
I have few product categories eg prod1 prod2. Each category have similar products. So prod1 has 3 similar products with slight difference in features and prod2 has 5 products with slight differences. ...
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2answers
540 views
Elasticity and logarithms
Let's consider a relationship between $ y $ and $ x $, $ y = a x^b $. Taking log on both sides, we have $$ \log y = \log a + b \log x $$
Now, my textbook, Nicholson and Snyder's Basic Principles and ...
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0answers
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Supply elasticity on a piece-wise linear supply function
The supply elasticity at a point is the willingness to produce more or less after the price has changed (due to whatever reason?).
$$\mu_{Q,P}=\frac{\partial Q_S/Q_S}{\partial P/P}=\frac{\partial Q_S}...
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1answer
60 views
Elasticity of substitution between leisure in two periods
This is a basic question, but I am new to macro models. The question is from Romer's text.
Assume a household only has one member and has no initial wealth, and the household lives for two periods. ...
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2answers
53 views
Monthly price elasticity and possibility of using daily values
I am calculating the price elasticity as a starting point to find a theoretical optimal price that would maximize our revenue.
I am looking at 2 years data and to use the price elasticity formula, I ...
2
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1answer
96 views
Elasticity of Supply for a Monopolist
Is the supply of output for a monopolist less elastic than that of a perfectly competitive firm with the same production function?
On one hand, it seems impossible to calculate the elasticity of ...
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0answers
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primary impact on real estate prices/taxes
Are my housing prices/taxes more influenced by the $40M beach house a few miles away from my home or those in the lower-class well beyond my county line?
Assuming a few basics:
there are differing ...
2
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1answer
124 views
Proof for homogeneity of elasticities
Throughout microeconomic literature i see the following restiriction placed on the nature of elasticities in demand system estimation.
This being for some arbitarary good $x$ we require price ...
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2answers
37 views
Price and cross price Elasticity of demand [closed]
The question is: Prove or disprove, if the price elasticity of a demand of a good is unitary then the cross price Elasticity of demand of that good is zero.
Any hints on how to approach this?
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Price elasticity on comparison website. How to calculate price elasticity using the coefficient of the products position on site?
I am looking at the following paper. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages ...
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1answer
59 views
Cross price elasticity of demand vs Price elasticity of demand
Is the cross price elasticity of demand between two goods always lower in magnitude than the price elasticities of demand of each good?
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1answer
37 views
Income Elasticity and Convexity of Demand in Income
What needs to be true about the demand function $z(y)$, where $y$ is income, for the income elasticity $\varepsilon = \frac{dz(y)}{dy}/\frac{z(y)}{y}$ to be always greater than one (so that the good ...
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Demand Elasticity, Factor Substitution: Independent?
Given $ Y=f(K,L;\sigma) $, the effect on labor from a change in the price of capital can be gauged through a substitution effect and a scale effect:
\begin{align*}
\frac{\partial L}{\partial r} & ...
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Elasticity of Substitution between 2 factors, without knowing relative prices
I'm trying to figure out the elasticity of substitution between input $s$ and input $v$. I know that the marginal rate of substitution between these two inputs are $\frac{v^2}{s(v+k)}$, where $k$ is ...
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1answer
39 views
How does elasticity impact market efficiency?
I am wondering how the price elasticity of demand (or supply) impacts market efficiency. A more specific question - can we say that in a monopolized market elasticity will be low, and that in a ...
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1answer
62 views
Monopoly equilibrium with a completely inelastic demand [closed]
What is the impact of an inelastic demand function on a monopoly production and pricing strategy ?
Theory states, that a monopoly will strive to maximize its profits, by arriving to a point where the ...
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1answer
86 views
Using an elasticity to evaluate changes in a dependent variable
Often in textbooks and online I see thte definition of an elasticity to be as follows:
1) $\epsilon = \frac{\frac{\Delta Y}{Y}}{\frac{\Delta X}{X}}= \frac{\partial \log Y}{\partial \log X}$
Thus, ...
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0answers
27 views
Low capitalist savings rates [closed]
Negative capitalist savings rate in the 30s, does this refute stimulus
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1answer
62 views
Conducting an experiment to calculate empirical elasticity with very small price changes
Let's say I want to conduct an experiment where I randomly vary the price of a product up or down by a small amount. Let's say I want to understand the price elasticity of demand for online shoppers ...
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1answer
277 views
Unitary Elastic Demand
My teacher defined Unitary elastic demand as demand which has $PED = (-)1$ . The formula I have been told for $PED$ is $\%\Delta Q_d /\% \Delta P$. But how can total revenue $( = P\times Q)$ remain ...
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PED and change in revenue
Ok so I was arguing with my teacher about this one question: Based on the price elasticity of demand coefficient determine whether the price should be increased or decreased for revenue to increase.
...
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1answer
1k views
Inferior and normal good and the change in price of those goods
In general, We know that if a good is normal, then as your income increases, then demand of that good increases as well as price is fixed. Similarly, if a good is inferior, then as your income ...
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1answer
50 views
Elasticity of subsitution: a redundant calculation?
Elasticity of subsitution is a measure of the curvature of an isoquant1 and can provide us information regarding the nature of the production functions we are dealing with. this is visualized in ...
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0answers
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Elasticity of substitution meaning
If I computed an elasticity of substitution of f.e. 0.9 between capital and labour, does this implicate that the factors are rather well substitutable or not? Since for 0 they are perfect complements ...
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1answer
556 views
Marshallian demand curve elasticities [closed]
I am stuck on a multiple choice question that came up on a Micro university past papers.
The question is:
Marshallian demand curves derived from utility function: $U = log(x) +
log (y)$. What is ...
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0answers
20 views
Raising the elasticity of substitution in an economy
Papers such as de la Grandville (1989) and Klump/de la Grandville (2000) have shown that a higher elasticity of substitution leads to higher economic growth. My question is, if there is a way to ...
2
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1answer
98 views
CES function estimation
For a paper I was using the micEconCES package to estimate the CES production function for a country at the aggregate. For a two-input function with capital and labour I used for the variables the ...
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1answer
545 views
How does price-elasticity of supply affect the incidence of tax on consumer and producer
From what I've read only price-elasticity of demand (PED) (not price-elasticity of supply (PES)) affects the burden of tax on the consumer/producer. However, my graphs suggest PES does affect it. Why ...
2
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2answers
341 views
Income Elasticity of Demand vs. shift in demand curve
I've just read an econ textbook and want to verify a statement/definition about income elasticity of demand.
Changes in income shift the demand curve, and we can measure the responsiveness of demand ...
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1answer
582 views
Price elasticity and optimal pricing in a monopoly with zero marginal cost
I am having trouble understanding how to calculate the optimal price P for a good and understand the optimal price elasticity of demand in the following condition:
The firm is a monopoly seeking to ...
