New answers tagged price
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Diff-in-Diff is a parametric model. A rule of thumb for parametric models is that you should have at least 25-30 observations (different authors might disagree but it is around 30) per independent regressor used in your model (see discussion in Verbeek A Guide to Modern Econometrics pp 36). However, note this is a rule of thumb and as Verbeek points out (my ...
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Price doesn't really embody anything. It's just the dollar value attached to a market good, usually set by a producer. It can vary over time, but it tends to converge toward a value near the willingness to pay of the average consumer (the intersection of supply and demand in the archetypal economics graph). Being above or below that value may not necessarily ...
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People have different tastes, needs, and budgets. So it doesn't make much sense to speak of the willingness to pay (WTP) of "the consumers". Each consumer has his or her own WTP for, let's say, a cup of coffee. If Alice' WTP is 1€ and the price is 2€ she will not buy. If Bob's WTP is 5€ then he will buy and enjoy the surplus. From Bob's ...
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Elasticity of demand is normally considered in relation to market demand for a good, that is, the sum of individual customer demands. Different customers will probably respond in different ways to a price increase. If the increase is 5%, especially on a low value item, very likely many customers will not notice, some will notice but not change their buying ...
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The standard elasticity still makes sense. Elasticity is not necessarily constant. Also, I am not sure what sort of formula you learned at your college but elasticity is rigorously defined (and also taught at college level for econ majors) as $EL = \frac{df(x)}{dx}\frac{x}{f(x)}$ for some function $f(x)$ (see Essential Mathematics for Economic Analysis by ...
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