Operations Research topics: SAS/OR,
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Calculating Price Elasticity of Demand

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Calculating Price Elasticity of Demand

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
SAS Employee
Posts: 21

Re: Calculating Price Elasticity of Demand

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!
Regular Contributor
Posts: 165

Re: Calculating Price Elasticity of Demand

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
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