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ASSet_MANagemen

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tT
发表于 2013-5-3 08:01 | 只看该作者

Elasticity Question

percentage, question, change, little, price
You know when we calculate Own price elasticity = (% Change in quanity demanded/% Change in price)  and % change for both is calculated as (Q0 - Q1)/[(Q0+Q1)/2] and (P0 - P1)/[(P0+P1)/2]
Well my question is for Income Elasticity and for Cross-Price Elasticity do we calculate the percentage changes the same way? or would they just be (Q0-Q1)/Q0 and (P0-P1)/P0
I’ve just been a little bit confused on the calculation if anyone cares to weigh in
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towardsutopia21

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2#
发表于 2013-5-3 08:05 | 只看该作者
My question exactly as i was revising econ
so what is d right answer? Shud we use average or initial when making income and substitution elasticity?

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justin88

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3#
发表于 2013-5-3 08:07 | 只看该作者
I’m not so sure now.  I just finished reading the part in the book, page 46 and it mentions that that’s arc elasticity and that it’s only used in certain scenarios as outlined on that page…  
So now I have even own price elasticity of demand mixed up :S
Help!!!!!

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TheMBAGlover

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4#
发表于 2013-5-3 08:14 | 只看该作者
And linear elasticity is actually pretty easy. If you are looking for X elasticity, the formula is
( coefficient [Slope] of X varible) *  (X/Q)

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