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An attractively simple rule of thumb is that the price elasticity is equal to -½. When little or nothing is known, the rule can be applied to goods and services with few substitutes such as food, clothing, housing, etc., and other broad aggregates. This useful rule is a vast simplification that holds under certain circumstances, but seems to work in practice. This chapter introduces the foundations of the rule of ½.

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Demand Elasticities Simplified I: Main Results

  • 章节

  • 发表日期：

    2025年

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  • Kenneth W. Clements,
  • Haiyan Liu,
  • Marc Jim M. Mariano,
  • Eliyathamby A. Selvanathan,
  • Saroja Selvanathan,
  • George Verikios

摘要

An attractively simple rule of thumb is that the price elasticity is equal to -½. When little or nothing is known, the rule can be applied to goods and services with few substitutes such as food, clothing, housing, etc., and other broad aggregates. This useful rule is a vast simplification that holds under certain circumstances, but seems to work in practice. This chapter introduces the foundations of the rule of ½.