Price Elasticities of Demand Are Minus One-half
AbstractAs 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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Bibliographic InfoPaper provided by The University of Western Australia, Department of Economics in its series Economics Discussion / Working Papers with number 06-14.
Length: 14 pages
Date of creation: 2006
Date of revision:
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Other versions of this item:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-CBA-2007-05-12 (Central Banking)
- NEP-MIC-2007-05-12 (Microeconomics)
- NEP-UPT-2007-05-12 (Utility Models & Prospect Theory)
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