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Price Elasticities of Demand Are Minus One-half

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Author Info
Kenneth Clements (Business School, The University of Western Australia)
Abstract

As an empirical regularity for broad commodity groups, we show that price elasticities of demand are scattered around the value of minus one-half. We also show that this finding is not inconsistent with the utility-maximising theory of the consumer under the conditions of preference independence. When nothing is known about the price-sensitivity of a good, a reasonable first approximation to its price elasticity is thus minus one-half.

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File URL: http://www.biz.uwa.edu.au/home/research/discussionworking_papers/economics?f=146998
File Format: application/pdf
File Function: First version, 2006
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Paper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-14.

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Length: 14 pages
Date of creation: 2006
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Handle: RePEc:uwa:wpaper:06-14

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  1. Espey, Molly, 1998. "Gasoline demand revisited: an international meta-analysis of elasticities," Energy Economics, Elsevier, vol. 20(3), pages 273-295, June. [Downloadable!] (restricted)
  2. Clements, Kenneth W & Yang, Wana & Zheng, Simon W, 1997. "Is Utility Additive? The Case of Alcohol," Applied Economics, Taylor and Francis Journals, vol. 29(9), pages 1163-67, September. [Downloadable!] (restricted)
  3. Kenneth W. Clements & Wana Yang & Simon W. Zheng, 1997. "Is utility additive? The case of alcohol," Applied Economics, Taylor and Francis Journals, vol. 29(9), pages 1163-1167, September. [Downloadable!] (restricted)
  4. Craig A. Gallet & John A. List, 2003. "Cigarette demand: a meta-analysis of elasticities," Health Economics, John Wiley & Sons, Ltd., vol. 12(10), pages 821-835. [Downloadable!]
  5. Espey, James A. & Espey, Molly, 2004. "Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 36(01), April. [Downloadable!]
  6. Brown, Alan & Deaton, Angus S, 1972. "Surveys in Applied Economics: Models of Consumer Behaviour," Economic Journal, Royal Economic Society, vol. 82(328), pages 1145-1236, December. [Downloadable!] (restricted)
  7. Jasper M. Dalhuisen & Raymond J. G. M. Florax & JHenri L. F. de Groot & Peter Nijkamp, 2003. "Price and Income Elasticities of Residential Water Demand: A Meta-Analysis," Land Economics, University of Wisconsin Press, vol. 79(2), pages 292-308. [Downloadable!] (restricted)
  8. Saroja Selvanathan & E. A. Selvanathan, 2005. "Is utility additive? Further evidence," Applied Economics, Taylor and Francis Journals, vol. 37(1), pages 83-86, January. [Downloadable!] (restricted)
  9. Powell, Alan A., 1992. "Sato's insight on the relationship between the Frisch 'parameter' and the average elasticity of substitution," Economics Letters, Elsevier, vol. 40(2), pages 173-175, October. [Downloadable!] (restricted)
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  10. Selvanathan, Saroja, 1987. "A Monte Carlo test of preference independence," Economics Letters, Elsevier, vol. 25(3), pages 259-261. [Downloadable!] (restricted)
  11. Barten, Anton P, 1977. "The Systems of Consumer Demand Functions Approach: A Review," Econometrica, Econometric Society, vol. 45(1), pages 23-51, January. [Downloadable!] (restricted)
  12. Deaton, Angus, 1974. "A Reconsideration of the Empirical Implications of Additive Preferences," Economic Journal, Royal Economic Society, vol. 84(334), pages 338-48, June. [Downloadable!] (restricted)
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