The Relationship of Direct Price Flexibilities to Direct Price Elasticities

James P. Houck

American Journal of Agricultural Economics, 1965, vol. 47, issue 3, 789-792

Abstract: In agricultural economics research, it is frequently easier to estimate direct and cross price flexibilities rather than price elasticities. However, elasticity estimates may be needed or wanted. The paper shows that, under rather general conditions, the reciprocal of the direct price flexibility is the lower absolute limit of the direct price elasticity. The departure of the true price elasticity from the flexibility reciprocal depends upon the strength of the cross effects of substitution and complementarity with other commodities.

Date: 1965
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