Price Elasticities of Demand Are Minus One-half

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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Year of publication:	2006
Authors:	Clements, Kenneth
Institutions:	Department of Economics, Business School

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Extent:	application/pdf
Series:	Economics Discussion / Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 06-14 14 pages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005730872