Demand Elasticities Simplified I: Main Results

Kenneth W. Clements (), Haiyan Liu, Marc Jim M. Mariano (), Eliyathamby A. Selvanathan (), Saroja Selvanathan () and George Verikios ()
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Kenneth W. Clements: University of Western Australia
Haiyan Liu: University of Western Australia
Marc Jim M. Mariano: Commonwealth Scientific and Industrial Research Organisation
Eliyathamby A. Selvanathan: Griffith University
Saroja Selvanathan: Griffith University
George Verikios: Griffith University

Chapter Chapter 2 in Short-cut Demand Elasticities and Other Convenient Approaches to Consumer Demand, 2025, pp 11-23 from Springer

Abstract: Abstract 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.

Date: 2025
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DOI: 10.1007/978-981-96-3588-7_2

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