topic Re: Calculating Price Elasticity of Demand in Mathematical Optimization, Discrete-Event Simulation, and OR

Calculating Price Elasticity of Demand

deleted_user — Mon, 10 May 2010 00:53:10 GMT

Hi All,

The SAS/ETS Examples on Calculating Price Elasticity of Demand...
(http://support.sas.com/rnd/app/examples/ets/simpelast/index.htm)

... is an example which used proc autoreg to calculate the parameter estimate for b, which suggests that increasing the price for a product by 1% will reduce the demand for this product by b%.

Can anyone help with calculating an estimate b that suggests
"decreasing the price for a product by 1% will increase the demand for that product by b%".

Many thanks,
DY

Re: Calculating Price Elasticity of Demand

YanXu — Mon, 10 May 2010 20:13:03 GMT

This forum is for Operations Research. I coundn't find the forum for SAS/ETS. Maybe you can contact support

http://support.sas.com/ctx/supportform/createForm

thanks!

Re: Calculating Price Elasticity of Demand

RickM — Mon, 10 May 2010 20:41:48 GMT

Those are two interpretations of the same slope. From the example you gave:

"For example, if the price of some good goes up by 1%, and as a result sales fall by 1.5%, the price elasticity of demand for this good is -1.5%/1% = -1.5."

To put it in your terms:

If the price of some good goes down by 1%, and as a result sales increase by 1.5%, the price elasticity of demand for this good is 1.5%/-1% = -1.5.

And the SAS Forecasting forum is probably a better place for SAS/ETS questions. Message was edited by: RickM