```Date: Fri, 25 May 2001 10:02:25 -0700 Reply-To: Susie Li Sender: "SAS(r) Discussion" From: Susie Li Subject: Re: Price elasticity versus slope calculation In-Reply-To: <003401c0e4ab\$7db61780\$800cfea9@oemcomputer> Content-Type: text/plain; charset="us-ascii"; format=flowed 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). Susie At 07:43 PM 5/24/2001 -0400, you wrote: >----- Original Message ----- >From: Kattamuri Sarma >Newsgroups: bit.listserv.sas-l >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 >in > > 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 wrote in message > > news:4.3.2.7.0.20010524091720.00b0a308@pop3.norton.antivirus... > > > 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 > > > susieli@summitry.com > > > Tel: (914)243-6812 > > > > > > ```

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