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Demand Elasticities Simplified II: Further Results and Details

In: Short-cut Demand Elasticities and Other Convenient Approaches to Consumer Demand

Author

Listed:
  • Kenneth W. Clements

    (University of Western Australia)

  • Haiyan Liu

    (University of Western Australia)

  • Marc Jim M. Mariano

    (Commonwealth Scientific and Industrial Research Organisation)

  • Eliyathamby A. Selvanathan

    (Griffith University)

  • Saroja Selvanathan

    (Griffith University)

  • George Verikios

    (Griffith University)

Abstract

The rule of ½ states that the price elasticity of demand is equal to -½. This chapter elaborates the rule by providing the analytical foundations, pinpointing the precise conditions under which it holds. Also included is an assessment of the practical importance of the rule and some related results on feasible simplifications of demand elasticities. The income elasticity of the marginal utility of income is a key ingredient of the rule; estimates of this parameter are presented.

Suggested Citation

  • Kenneth W. Clements & Haiyan Liu & Marc Jim M. Mariano & Eliyathamby A. Selvanathan & Saroja Selvanathan & George Verikios, 2025. "Demand Elasticities Simplified II: Further Results and Details," Springer Books, in: Short-cut Demand Elasticities and Other Convenient Approaches to Consumer Demand, chapter 0, pages 25-63, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-3588-7_3
    DOI: 10.1007/978-981-96-3588-7_3
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