Questions tagged [elasticity]
Elasticity is the measurement of how responsive an economic variable is to a change in another.
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how is output elasticity different from marginal product of a factor input?
marginal product has been defined as the addition to total product given the employment of one more unit of a factor input.
output elasticity has been defined as the percentage change in output given ...
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Inequality and effect on pricing
Suppose there’s an island that for whatever reason has a finite amount of US Dollars; 1000 residents live on the island and use this fixed amount of currency to exchange goods and services.
Suddenly, ...
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What point am I calculating the PED (Price Elasticity of demand)
I'm at a very basic level of economics (highschool), so what I write may not be very coherent, i'm just a bit confused and I can't get any book or source to awnser the question I have.
See, the ...
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Price elasticity of demand/supply following tech change
Is the answer (b) ?
I found the two equilibrium prices before and after the change by doing Q^D = Qs1, Q^D = Qs2.
Before the change, I get for the supply side : P = 15 and Q = 5, giving me a price ...
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Elasticity computations and revenue
I would have appreciated some help in this issue. I have a demand schedule that looks like this
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Price elasticity of demand coefficient
I am working on the following question:
AS price increases along a straight line demand curve, will the price elasticity of demand coefficient increase, decrease or remain unchanged?
The answer states ...
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Elasticity computation
Suppose that we have the following regression:
$$ln (h) = e_{0} + e_{1} ln (w) + u$$.
Isn't elasticity $e_{1}$? in other words: $\frac{\delta ln (h)}{\delta ln (w)}$? I am a bit confused since I have ...
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Why don't producers of goods with inelastic demand refuse to increase supply?
I'm reading Paul Samuelson's Economics (19th edition, 2009). In page 71, the Paradox of the Bumper Harvest is introduced. According to the paradox, an increase in food supply from a good harvest ...
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Is the price elasticity of a product equal to the sum of all cross-price elasticities of demand for that product? Why?
I encountered the claim stated in the title, without it being further substantiated. I'm looking for some elaboration on it, assuming it's true. Also on an intuitive level.
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Why is the demand curve inelastic for essential items?
Elasticity refers to the percent change in quantity with respect to the percent change in price.
Elastic means that the percent change in quantity is greater than the percent change in price.
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Price Elasticiyt of Demand & (AR - MR)
I have the following question:
Using this equation: $MR = P(1+\frac{1}{ε})$ and the attached graph. How does the vertical distance between the demand curve and MR curve at a given level of output ...
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Different methods to calculate price elasticity
I was testing different methods to calculate price elasticities in simple theoretical scenarios and I encountered a seemingly discrepancy between two very popular methodologies.
Methodology 1: use the ...
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Elasticity of substitution between capital and effective labour
While going through the derivation of elasticity of substitution between capital and effective labour in economic materials for a Slow growth model, I found the following step there:
$\frac{\partial ...
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Different elasticities of substitution
I have been reading into generalizations of the concept of elasticity of substitution for more goods/inputs and three main possibilities emerged:
Hicksian EOS
Allen-Uzawa EOS
Morishima EOS
HICKS
As ...
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Which utility functions generate constant (but arbitrary) price/income elasticity of demand functions?
I want to estimate a demand function, and for convenience, I would suppose it has constant price and income elasticities: $\varepsilon$ and $\eta$, let's say. That is, demand $x_i(p, w)$ would be ...
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Optimised Pricing with Static Price Data
If you have price data going back several years, but the price is constant, is there any way to work out the elasticity of demand (or dynamically optimise prices another way).
The sales volume is in ...
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Truth behind Samuelson's statement against elasticities
I found the following statement by Paul Samuelson:
Through the influence of Alfred Marshall economists have developed a fondness for certain dimensionless expressions called elasticity coefficients. ...
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Price Elasticity with real monthly data
Is it possible to calculate the Price elasticity based on the following set of data?
I tried with the formulas widely available, but looks like the results are not correct.
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How to determine elasticity of demand when equation has more than one variable
How should one go about determining the own price elasticity of demand of the following:
Assume that the market demand for barley is given by: Q=1,900−4PB+0.1M+2PW
, where Q
is the quantity of barley ...
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why is diamond an inelastic good?
I understand that since diamonds are valued as rare, high-value items in society, even when the price for them increases, the quantity demanded remains the same. That is, people are willing to pay ...
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Krugman Model: Profit Maximization (relation price elasticity of demand and elasticity of substitution)
the pictures outline the situation and my problem. The only thing I dont understand, is why the inverse of the price elasticity is equal to the negative elasticity of substitution? (price elasticity ...
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Trans-log production function or trans-log cost function
I'm researching to analyze the elasticity of substitution between factors of production. From what I've read, many researchers use the trans-log production and cost functions. Which function should I ...
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Examples of instrumental variables for business problems (not rainfall!)
I have been learning about IV as a non-economist and I think I understand the examples I've seen which used rainfall as an IV for modeling the sales of crops or fish at an outdoor market.
However, for ...
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Difference between price elasticity of demand and arc price elasticity of demand [duplicate]
I am very confused between the definitions of price elasticity of demand.
The actual definition I was given is $$E=\frac{\Delta Q \backslash Q}{\Delta P\backslash P}$$
I was once asked the following : ...
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Using price elasticity of demand to optimize price increases
I want to share some context with you I am working for a pharmaceutical company and the business side needed to update the price for some products once a year. So I thought to develop a model to ...
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How does the market respond when some suppliers of one product are forced to switch to supplying a similar product?
I'm interested in coming up with a basic model to describe the following simple situation.
Initially there is an equilibrium in the market for the consumption of product A and product B. Product A and ...
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Is elasticity of substitution defined for non-homogeneous production functions?
The elasticity of substitution between two inputs $x_1$ and $x_2$ is typically given as
$$\frac{d \ln \left( \frac{x_2}{x_1} \right)}{d \ln(\mathrm{MRTS}_{21})}.$$
As these notes show, if the ...
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Is there a standard term for the elasticity of an isoquant?
Isoquants - the level sets of a production function $f$ - are very useful in microeconomics. For example, if we hold all but two inputs fixed, then the isoquant is a plane curve that quantifies the ...
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How is it possible for demand to be perfectly elastic under perfect competition?
So according to perfect competition, a single firm is a price taker, having to sell at the equilibrium price as determined by supply and demand. As you can see from the single firm graph, demand is ...
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Monopolies on Giffen Goods
I’m taking an intermediate microeconomics course in college and just got to the topic of monopolies. I know the concept of a Giffen good.
As always, Revenue is given by $R= Pq$.
Since the monopoly has ...
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Economy Grade 12: Demand, Offer, Price of the Market, how to solve the exercise?
The Egyptian market, an increase in the price of chestnuts has been accompanied by an increase in the areas planted with chestnuts and, as a consequence, also with an increase in the quantities ...
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Derivation of Allen-Uzawa Elasticity of Substitution from Hicks Elasticity of Substitution in two goods
Everywhere I've looked, the author of the text asserts that the Allen-Uzawa Elasticity of Substitution is equal to the Hicks Elasticity of Substitution in two goods. I've spent a long time trying to ...
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Income elasticities of demand in the Transcendental Log Cost model
I just wanted to ask a questions about the Translog Model that might be silly, but I come from a totally different background (please bear with me)... To avoid confusion, I will be following notation ...
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Question regarding perfectly elastic demand
I know that perfectly elastic demand looks like a horizontal line on a graph, but this implies that somehow the quantity demanded is multiple values simultaneously at a single price point. How is this ...
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Price Elasticity for a group of products
I am given a list with items and corresponding prices and units sold. Those items can be clustered into product groups. For most of the items, between 2 and 3 different prices can be observed. This ...
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Real world price elasticity when making pricing decisions
This is my first time trying to calculate price elasticity and put it to work in a real world situation. Let me state my problem first:
I work at a company (let’s call it a store) that was selling a ...
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Obtaining demand/supply elasticity of prices
First, the general formula for price elasticity of demand or supply, the change with which demand or supply responds to price changes, is $\frac{dQ}{dP}.\frac{P}{Q}$. Second, if I'd instead want to ...
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How Can I Model Demand Elasticity?
Can demand elasticity be determined by examining the distribution of marginal utility across a potential customer base?
For example, if the distribution of marginal utility among potential customers ...
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Can this be “price elasticity”
I’m doing an exploratory data analysis for a store' sales data. One thing i came over is number of sales per a product where a product has a mostly fixed price. When i plot number of sales vs a price ...
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How useful are basic economics (elasticity / consumer & producer theory) in real life?
I am thinking how these concepts will be applied in the industries / at a job.
For example I could see elasticity as useful in projecting the outcomes of supply ...
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Trying to figure out the price elasticity of demand
I have a demand curve $y(x) = x^{-b}$ where $b > 1$.
I'm trying to figure the price elasticity of demand, but I'm not familiar with finding price elasticity without having some sort of numbers.
...
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An attempt at using a graphing calculator to visualize the price elasticity of demand for a point moving on the demand curve
I assume a demand function ( of price) : $Q(x)= 10-2x$ , and therefore, a price function (of demand ): $P(x)= -\frac 12 x +5$.
The demand curve ( $y =-\frac 12 x +5$) represents the price function, ...
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How to compare the price elasticity of demand from different points by looking at the graph?
Let's say I have a demand curve looks something like this:
How could I analyze who have the highest or lowest price elasticity of demand?
it seems that the point 1 has highest price or demand? But ...
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How to represent the elasticity function with demand on the X axis? How to transform the elasticity formula to this effect?
The formula for price elasticity of demand uses price as independent variable.
But I wonder what the elasticity graph looks like on an ordinary microeconomics system of coordinates, where demand is on ...
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Is -1 elasticity considered unit elastic or relatively inelastic?
Simple question but can't find answer.
Is -1 elasticity considered unit elastic or relatively inelastic?
We know that if % change in quantity / % change in price = 1, we have unit elastic, does that ...
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Mathematical explanation of transformations of Marginal Revenue
MR = d(Total revenue)/dQuantity = d (Price * Quantity)/dQuanitity
This is the same as this : MR = P(Q) + dP/dQ
I did it with an example and it amazed me how both are equal but I still dont get how. ...
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Microeconomics question on elasticity
Two drivers--Walt and Jessie--each drive up to a gas station. Before looking at the price, each places an order. Walt says, 'I'd like 10 gallons of gas.' Jessie says, 'I'd like $10 worth of gas.' What ...
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Elasticity calculation
I have a utility function depending on consumption and leisure, $u(c, 1-h) = log(c) + Alog(1-h)$ subject to $c = wh + I$, where $w$ is wage, $I$ is income, $h$ is hours worked. I set up the ...
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Pricing elasticity*coefficient from glm
Problem:
I would like to understand the pricing elasticity in an industry while factoring in other independent variables that affect units sold.
Where I am currently at:
Much of the data for this ...
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What is a simple demand function that allows for different price and income elasticities than 1 and -1?
Cobb-Douglas utility functions assume price elasticity of $-1$ and income elasticity of $1$.
Are there any utility functions with two goods that lead to a demand function, where you have the choice of ...
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