Date: Fri, 25 May 2001 10:02:25 -0700
Reply-To: Susie Li <susieli@SUMMITRY.COM>
Sender: "SAS(r) Discussion" <SAS-L@LISTSERV.UGA.EDU>
From: Susie Li <susieli@SUMMITRY.COM>
Subject: Re: Price elasticity versus slope calculation
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Thanks for all your help, I think I have a better "picture" of the
underlying relationship between the two.
There is a nonlinear relationship between elasticity and slope. Elasticity
is like slope weighted by (price/demand) at a given point. Slope can be
exaggerated if price is high and demand is low (P/D large); slope can be
dampened if price is low and demand is high (P/D is low).
At 07:43 PM 5/24/2001 -0400, you wrote:
>----- Original Message -----
>From: Kattamuri Sarma <firstname.lastname@example.org>
>Sent: Thursday, May 24, 2001 7:42 PM
>Subject: Re: Price elasticity versus slope calculation
> > Hello Susie:
> > Suppose demand is a function of Price.(P) and income (Y). D = D(P,Y).
> > The Price elasticity is = change in the logarithm of D for a unit change
> > the logarithm of P.
> > where slope is simply change in D for a unit change in P. All changes are
> > calculated
> > at a given level of income.
> > In practice, at any given point, elasticity is calculated as (percentage
> > change in D ) / (percentage change in P).
> > and slope is calculated as (change in D) / (Change in P). The relationship
> > between elasticity and slope should be
> > clear:
> > (change in D/ D) / (Change in P / P ) = elasticity.
> > = ((change in D / Change in P))* ( P/D).
> > = Slope * (P/D).
> > So elasticity = slope * (Price/Demand) at any given point (D,P).
> > Hope this is helpful.
> > Kattamuri Sarma
> > Susie Li <susieli@SUMMITRY.COM> wrote in message
> > news:email@example.com...
> > > SAS-Lers,
> > >
> > > In a pricing study, can anyone explain to me simply the mathematical
> > > relationship between "price elasticity" and a straightforward
> > > "slope"? And, what are the advantages and disadvantages of using these
> > two
> > > measurements?
> > >
> > > Price elasticity=%change in quantity sold due to %change in price
> > > Slope=change in quantity sold due to change in price
> > >
> > > Thanks,
> > > Susie Li
> > > Summitry Integrated Resources
> > > Yorktown Heights, New York
> > > firstname.lastname@example.org
> > > Tel: (914)243-6812