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| RE: micEconAids - Compensated Demand Elasticities using the nonlinear AIDS model [ Reply ] By: Arne Henningsen on 2019-10-14 05:56 | [forum:47008] |
| A price elasticity of demand can be interpreted as percentage change of a demanded quantity when a price increases by one percent, e.g., if the compensated cross-price elasticity between the price of good 1 and the quantity of good 2 is -0.407, a 10% increase in the price of good 1 would reduce the demanded quantity of good 2 by 4.07 percent. | |
| micEconAids - Compensated Demand Elasticities using the nonlinear AIDS model [ Reply ] By: Camila Brown on 2019-07-07 23:30 | [forum:46829] |
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Dear Arne, In Section 4 of your paper (https://cran.r-project.org/web/packages/micEconAids/vignettes/micEconAids_vignette.pdf) you provide a useful section on demand elasticities. I have a question on the Hicksian (compensated) demand elasticities and specifically on its interpretation. As far as I understand demand elasticities using your micEconAids package that result after using the “Iter-ative Linear Least-Squares Estimator are computed at the sample mean values rather than for individual observations. Are these elasticities percentage-POINT changes in shares or percentage changes? For example, if the compensated cross-price elas is -0.407 between pFood1 and q_wFood2...does this implies that a 10% increase in pFood1 would reduce q_w2Food (expenditure share) by 4.07 percentage points or 4.07%? Best regards, Camila |
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