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    eva134 Posts: 1, Reputation: 1
    New Member

    Feb 3, 2012, 07:49 AM
    Economics - Assumption on Demand Curve
    How to estimate demand elasticity if I have sales data (Milk) from a grocery store chain? Any assumptions can be made on demand curve?
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
    Senior Member

    Feb 4, 2012, 05:42 AM
    It depends on the nature of your data, and at what point you're developing the estimate (remember, elasticity is not usually constant along the curve, due to how it's computed, and so elasticity at any point A on the curve will be different than at any other point B).

    If your data consists of distinct points (various observations of price and demand pairs) you can estimate data in between any two of the points by assuming that you're measuring % changes in P and Q as being measured against the midpoint of your two observations.

    Or, if you happen to know that your P-D curve is linear, you can obtain the elasticity at any particular point (D1, P1) by using the fact that elasticity can be expressed as

    (P1 / D1) x (1 / m)

    where m is the slope of the P-D line.

    That's why I say it depends on the nature of your sales data.

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