Introduction to Elasticity Calculation and SAS Example
Elasticity: Theory and Application
Elasticity calculation for different models
The classic price elasticity of demand is defined as the percentage change in quantity demanded for some good with respect to a one percent change in the price of the good.
For example, if the price of some good goes up by 1%, and as a result sales fall by 1.5%,
the price elasticity of demand for this good is -1.5%/1% = -1.5.
Thus, price elasticity measures responsiveness of quantity demanded to changes in price.
Price elasticity greater than one is called price elastic, and price elasticity less than one is called price inelastic.
A given percentage increase in the price of an elastic good will reduce the quantity demanded for the good by a higher percentage than for an inelastic good.
In general, a necessary good is less elastic than a luxury good.
Price elasticity can be expressed as in the following Printable pdf tutorial
Next tutorial: Elasticity Theory and Application-1
Statistics Tutorial Home, 6. Elasticity: Theory and Application-2
Related Articles you might be interested: