# Questions tagged [elasticity]

Elasticity is the measurement of how responsive an economic variable is to a change in another.

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In my textbook, it's stated that: When $\epsilon < -1$, demand is elastic and raising price will result in smaller income, while lowering price will result in bigger income. When $\epsilon =... 3answers 984 views ### Price Elasticity of Demand for Positive Price Increases What does it mean when the price elasticity of demand %Qd/%P is greater than one? Typically I hear that it means the demand is elastic since if, say, the price decreases by 1% the demand for the ... 1answer 430 views ### Intuition: Difference in price elasticities of demand due to different bases Source: pp 91-92, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw If you try calculating the price elasticity of demand between two points on a demand curve, you will quickly ... 1answer 10k views ### How does one derive the elasticity of substitution? For two goods$x$and$y, the elasticity of substitution is defined as $$\sigma \equiv \frac{d\log\left(\frac{y}{x}\right)}{ d\log\left(\frac{U_x}{U_y}\right) }= \frac{\frac{d\left(\frac{y}{x}\right)}... 4answers 2k views ### What are Giffen Goods? What exactly are Giffen goods and are they of purely theoretical interest or has there been empirical evidence of their existence? 3answers 2k views ### Why absolute value in elasticities and marginal rate of substitution? This is a point I find very confusing and very hard to justify to students. Depending on the books, one finds many different conventions regarding the sign of elasticities and marginal rate of ... 2answers 1k views ### How to estimate empirically a demand curve Suppose I have a small business that sell ice creams. An Icecream cost 2, and every day I have different values of sales. ... 2answers 2k views ### How is price elasticity determined in practice? Price elasticity of demand and Price elasticity of supply are two of the most important concepts of microeconomics, but they're generally explained from a hypothetical standpoint, and little effort is ... 5answers 2k views ### Econometrics: Is elasticity meaningful in my, or any, regression? A few months ago I interned at this organization; and, as a going away present, I decided to spend my last week, with whatever off time I had, to investigate the factors that affect teacher salaries. ... 2answers 670 views ### Calculate the elasticity of substitution of Epstein-Zin preferences$$ \newcommand{\E}{\mathbb{E}} Let a consumption sequence be given C=(C_0, C_1,...) and let C_t^+ = (C_t, C_{t+1}, ...). Now, suppose I have Epstein-Zin preferences, \begin{align*} U_t(C_t^+) &... 2answers 967 views ### What determines the outcome of a price war, and why isn't that outcome reached instantaneously? Mary is making a hefty profit manufacturing and selling widgets. Jim has some money laying around and he is trying to figure out if he shouldn't start manufacturing some widgets too. In this example ... 1answer 173 views ### Generalized KPR: Frisch Elasticity Consider the following version of KPR preferences (with l being leisure): U(c,l) = \left(\left(c\right)^\gamma l^\omega\right)^{1-\sigma}$$I'm after the Frisch elasticity:$$ \frac{\partial(1-... 2answers 1k views ### If one always spends the same amount, what's one's price elasticity of demand? Source: p 109, Question 5.9, Principles of Microeconomics, 7 Ed, 2014, by N Gregory Mankiw = Question 5.7, Principles of Microeconomics, 4 Ed, 2008, by N Gregory Mankiw 9.\color{green } { \text { ...
Could anyone provide a possibly intuitive and friendly explanation to the Engel Aggregation $(\sum s_i \eta_i = 1)$ and Cournot Aggregation$(\sum s_i \epsilon_{ij} = -s_j)$? Here, \$s_i = \frac{p_i,x_i}...