Economics Stack Exchange
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Questions tagged [elasticity]

Elasticity is the measurement of how responsive an economic variable is to a change in another.

Elasticity is the measurement of how responsive an economic variable is to a change in another. Elasticity can be quantified as the ratio of the percentage change in one variable to the percentage change in another variable, when the latter variable has a causal influence on the former.

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How does one derive the elasticity of substitution?

For two goods $x$ and $y$, the elasticity of substitution is defined as $$\sigma \equiv \frac{d\log\left(\frac{y}{x}\right)}{ d\log\left(\frac{U_x}{U_y}\right) }= \frac{\frac{d\left(\frac{y}{x}\right)}{\frac{y}{x}}}{…
Stan Shunpike
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How is price elasticity determined in practice?

Price elasticity of demand and Price elasticity of supply are two of the most important concepts of microeconomics, but they're generally explained from a hypothetical standpoint, and little effort is given to explaining how they are measured, or…
Jason Nichols
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Elasticity of Durable Goods vs Non-Durable Goods

Does anyone know any seminal reference (either a paper in a top economics journal or a book) that compares own-price elasticities of demand for durable vs non-durable goods? My intuition tells me that durable goods should be more elastic ... but not…
phdstudent
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Help with Income Elasticity Exercise in Becker's Economic Theory

On page 18 of his book Economic Theory, Gary Becker provides the reader with the following exercise (no answers given): Exercise Statement: Write the formula $\sum_j K_jN_j = 1$ where $N_j$ is the market income elasticity of demand for the $j$th…
Stan Shunpike
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What is the empirical price elasticity of demand for insulin?

A lot of textbooks say that demand for insulin is perfectly inelastic. I don’t think this is quite true (and I am a type 1 diabetic). It’s clearly very inelastic, but not perfectly so. There are things you can do to reduce your insulin intake, e.g.…
Mohan
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Obtaining demand/supply elasticity of prices

First, the general formula for price elasticity of demand or supply, the change with which demand or supply responds to price changes, is $\frac{dQ}{dP}.\frac{P}{Q}$. Second, if I'd instead want to express the sensitivity of prices to changes in…
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What is the difference between constant elasticity of substitution and elasticity of substitution?

What is the difference between constant elasticity of substitution and elasticity of substitution? Are these formulas related? How are they different concepts? I just did a whole problem set involving these and got the right answers. But my thought…
Stan Shunpike
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Finding the elasticity of a function with respect to a variable from logarithm

I tried to ask this question on Math Stackexchange, but got no answer. I'll try here. I am a bit confused as to how to see elasticity of a function with respect to a variable from logarithm. Lets say we have the following function: $$y^*…
Zebraboard
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Elasticity of the factor share

My question concerns exercise 2.4 from Hal Varian's Microeconomic Analysis. Please note that I am not requesting a solution to the exercise, and only asking how to understand what I am being asked to do here. 2.4. Let $f(x_1, x_2)$ be a production…
Max
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Production in the long run - calculating wage and rental elasticity of demand

I have data for a business firm for two periods. The data include: output (Q), capital (K), labor (L), wage (W) and the rental rate of capital (R). Here they are: Period K L W R Q 1 30 50 200 100 500 2 …
Olga Gnatenko
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Elasticity when the demand function is given

Given the demand function, $ q = kp^{-\epsilon} $, how do I calculate the elasticity? As a result, I do know that the elasticity when the demand function is in this form is $ - \epsilon $. But I'd like to know how. I also found a derivation online…
WorldGov
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Elasticity and logarithms

Let's consider a relationship between $ y $ and $ x $, $ y = a x^b $. Taking log on both sides, we have $$ \log y = \log a + b \log x $$ Now, my textbook, Nicholson and Snyder's Basic Principles and Extensions derives the relationship between…
WorldGov
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Price elasticity on comparison website. How to calculate price elasticity using the coefficient of the products position on site?

I am looking at the following paper. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03. Link:…
Sophie
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Does unit elasticity has to be at exactly the middle of the demand curve?

Can unit elasticity be anywhere else on the demand curve other than the midpoint?
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Composite Elasticities

Consider the following composite function $$ \lambda(\theta(J)) $$ If you want to think about it in more economic terms, think about it how values of firms $J$ affects market tightness $\theta$, and through that, job finding rates $\lambda$. Let…
FooBar
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