Questions tagged [elasticity]
Elasticity is the measurement of how responsive an economic variable is to a change in another.
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questions
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Does one include inflation when computing elasticity?
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 ...
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Finding data on (estimated) trade cost elasticities of imports
I'm an undergrad student of economics, and I need to find estimates of the trade cost elasticity of the UK's imports for some homework. My instructors pointed me to the World Bank's databases, ...
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elasticity in economis is different than elasticity in physics? [closed]
Elasticity in economics : "Elasticity is a general concept which basically means how sensitive one quantity is with respect to some other quantity." (this is from an answer here), so it's like how far ...
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What does the elasticity say about the fraction of total cost used on input 1?
A firm have the following production function
$$
y=x_{1}^{\alpha} x_{2}^{1-\alpha}, \quad 0< \alpha < 1
$$
$w_1>0$ is the cost of input 1 and $w_2 > 0$ is the cost of input 2.
(1.1) ...
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2answers
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Who set the price on product in the USA?
I was asking a buddy a question about pricing and he said that you can't control your own pricing.
The context to this question was, I said if you tax firms more, then they're going to raise the ...
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0answers
14 views
Supply elasticity of finite (non-renewable) resources
What is the elasticity of supply of a finite (non-renewable) resource that cannot be replaced (i.e. fixed stock)? Intuitively it seems like it should be inelastic, yet I can also reason elastic.
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1answer
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which is an example of demand curve that is always inelastic/elastic?
Which class of functions have the property of being always elastic?and instead always inelastic?
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Can the effect of different prices of gasoline at different gas stations be measured?
I am looking for studies in which the effect on demand of different prices of gasoline at different gas stations in the same area is measured or estimated (on the same day or hour).
This question ...
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1answer
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How to maximize total revenue on constant elasticy curve
So to maximize total revenue, we sell at the price on the demand elasticity curve where elasticity=1 right? Lets say on one curve, the elasticity throughout the curve is equal to 1.5? How much should ...
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2answers
49 views
Price Elasticity of Demand - elastic demand and impact of price reductions on total revenue
A question in relation to Price Elasticity of Demand.
My understanding is that when demand is elastic, a price reduction will increase
total revenue.
If the price of a product changes from \$100 to \...
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0answers
14 views
Market structure determination
I will be conducting a research about the market structure of an outdoor farmers market. I wanted to know what kind of survey questions could help me for example to determine the PES of the market or ...
0
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1answer
39 views
Why income elasticity of demand of luxury good in greater than 1?
According to textbook and wikipedia, "if income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a ...
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2answers
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elasticity of income if price changes by 10 percent
Arista always spends 10
% of her income on whatzits. Assume that her income increases by some percentage while the price of whatzits remains constant (and that all whatzits cost the same). What is ...
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2answers
88 views
Does recent gasoline price sensitivity data show that HR 763 Carbon pricing insufficient for the transportation sector?
Does recent gasoline price sensitivity data show that HR 763 Carbon pricing insufficient for the transportation sector?
This answer provided by: "Heh" moved to chat so it can't be seen:"Of course ...
5
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2answers
301 views
Proof coefficient in log-log model is equal to coefficient of elasticity
I am trying to see how we treat $\varepsilon$ in the following proof:
Suppose we have a log-log single variable regression model
$$ \ln(y) = \alpha + \beta \ln(x) + \varepsilon $$
then take partial ...
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0answers
11 views
Simple question on interpretation of elasticity
I am doing a multivariable calculus course and found elasticity interesting. The formula for percentage change with elasticity is
$\LARGE\frac{\frac{\Delta y}{y}\large\cdot100}{\frac{\Delta x}{x}\...
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1answer
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How high of a carbon fee would reduce global emissions by 50% in 15 years?
OVERVIEW OF THE EMF 32 STUDY ON U.S. CARBON TAX SCENARIOS
https://www.worldscientific.com/doi/pdfplus/10.1142/S201000781840002X
About half of the EMF 32 models met a 50% reduction in carbon ...
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0answers
20 views
Is oil supply really inelastic in the short term
Is oil supply really inelastic in the short run?
Though it remains evident that in the short run, the known capacities of oil can't be increased and hence we can assume that there remains a upper cap ...
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0answers
49 views
Elasticity of substitution
So, this is an economics question but the problem I have is a pure math problem I guess. So I have the following equation:f(x,y)
this function have the elasticity of substitution(EOS): 1/(1-beta). a,...
2
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1answer
87 views
Confidence Intervals for Elasticity in Simple Linear Regression
I'm pretty sure this is a very simple question that I am missing something obvious. I have a simple linear regression with multiple independent variables. I want to calculate the elasticity (no ...
0
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1answer
63 views
Mathematical framework for modelling the relationship between price and sales of a product
In my job as a data scientist, I am required to model the relationship between the price of a product and the sales or number of unit sold. I am trying to build a simplistic model, the assumptions of ...
0
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1answer
75 views
(Microeconomics) Why must fims always lower prices when there is excess supply?
This may seem like a basic question but it has been really bothering me for a while. I understand what excess supply is, and my question is regarding the firms' response to it.
All economics texbooks ...
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0answers
11 views
How to simulate changes in quantity demanded when several prices change?
I am not sure if this is a straightforward question or not. Basically, I have a set of products along with their prices and quantities demanded. I also have own and cross price elasticities for each ...
0
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1answer
24 views
Effect of a change in quality on price elasticity of demand
I am interested to know how one would expect a change in the quality of a product to affect its price elasticity of demand. Two example will illustrate my confusion:
Example 1
Suppose a producer is ...
2
votes
1answer
57 views
Why is elasticity not constant on a straight line graph?
There are different zones of elasticity on a graph, but if we are to imagine a negatively sloped, straight line on a price v quantity graph, we find that elasticity differs based on where we look on ...
0
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1answer
92 views
Constant elasticity proof for log-linear demand curve
From Perloff 2008e solved 2.2:
Q: Show that the elasticity of demand is a constant e if the demand function is log-linear, ln Q=ln A+e ln p.
A: Differentiating with respect to p, we find that (dQ/dp)/...
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Should a Price Elasticity of Demand model exclude items that sold out or marked down from the original price
Consider a Price Elasticity of Demand model built with linear regression to estimate the Percent Change in Quantity Demanded given a Percent Change in Price specifically for specialty items which have ...
1
vote
1answer
45 views
How do you use a Log-linear model when you have negative Xs?
I am trying to us a Log-linear model to derive an elasticity. However, some of my Xs are negative numbers. Being as the model relies on the natural log of the Ys and the Xs, how can this model work ...
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0answers
15 views
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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2answers
125 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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0answers
53 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 ...
2
votes
1answer
195 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 ...
2
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1answer
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3
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2answers
103 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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0answers
38 views
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 ...
1
vote
2answers
64 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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0answers
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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 ...
0
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0answers
47 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
44 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 ...
0
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1answer
45 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 ...
0
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0answers
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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
votes
1answer
42 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 ...
0
votes
1answer
55 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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0answers
49 views
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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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. ...
3
votes
2answers
867 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}...
0
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1answer
68 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. ...
