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BNET Business Dictionary
- Elasticity
- the measure of the sensitivity of one variable to another.Example: In practical terms, elasticity indicates the degree to which consumers respond to changes in price....
- Elasticity definition on BNET »
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- World Trade And Global Integration In Production Processes: A Re-Assessment Of Import Demand Equations
- It is common to observe that demand elasticities in trade equations for imports are implausibly large, and that they differ between countries. Both of these present us with problems, as they imply trade will rise without bound as a proportion of GDP (Gross Domestic Product). The paper reported here looks...
- White papers 2005-07-01
- Import Demand Elasticities and Trade Distortions
- To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. This paper modifies GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. It follows certain estimates to construct...
- White papers 2004-12-02
- Housing, Consumption, and Credit Constraints
- The paper tests the credit-market effects of housing wealth shocks by estimating the consumption elasticity of house price shocks among households in different age quintiles. Younger households face faster expected income growth and hence would like to borrow more than older households. It estimate consumption elasticity's from housing wealth by...
- White papers 2004-09-29
- One-Sided Elasticities And Technical Efficiency In Multi-Output Production: A Theoretical Framework
- One of the concepts that have sparked considerable interest in the theory of production and efficiency is that of Returns To Scale (RTS). Economics researchers typically define RTS using the notion of elasticity. Considerable research activity on RTS has also been observed by management science researchers, who utilize the methodology...
- White papers 2004-08-03
- Optimal Unemployment Insurance When Income Effects Are Large
- The optimal rate of social insurance is shown to depend positively on the size of the income elasticity and negatively on the size of the substitution elasticity. The paper estimates these elasticities using semi-parametric hazard models and variation in UI laws across states and over time. The estimates indicate that...
- White papers 2004-05-01
- Why Do Asset Prices Not Follow Random Walks?
- This paper analyzes the effect of non-constant elasticity of the pricing kernel on asset return characteristics. It is shown that declining elasticity of the pricing kernel can lead to predictability of asset returns and high and persistent volatility. Also, declining elasticity helps to explain the use of technical analysis and...
- White papers 2004-01-01
- Measuring The Effect Of Globalization On Labour Demand elasticity: An Empirical Application To OECD Countries
- There are various paths through which globalization are channelled to the labour market. One of these is the effect on labour demand elasticity. Trade might induce an increase in this elasticity via a scale effect due to the increased competition on the output market and/or via a substitution effect generated...
- White papers 2003-11-01
- Price elasticity of Demand for Term Life Insurance and Adverse Selection
- This paper provides an empirical estimate of "price" and "risk" elasticity's of demand for term life insurance for those who purchase some insurance. It finds that the elasticity with respect to changes in premiums is generally higher than the elasticity with respect to changes in risk. It also finds that...
- White papers 2003-08-01
- Macroeconomic Performance And Poverty Reduction
- This paper investigates the link between macroeconomic performance and the change in the poverty rate among 47 episodes of growth and 52 episodes of economic downturn in developing and transition economies. It shows that, on average, (i) the greater the inequality, the lower the elasticity of poverty to growth, and...
- White papers 2003-04-01
- Measuring the Impact of Promotions on Brand Switching When Consumers Are Forward-Looking
- Logit choice models have been used extensively to study promotion response. This paper examines whether brand switching elasticities derived from these models may be over-estimated due to rational consumer adjustment of purchase timing to coincide with promotion schedules, and whether this bias can be addressed by a dynamic structural model....
- White papers 2003-01-23
- The Psychology of Pricing
- If demand for the product drops when the price is increased by only 1%, the product should be price-sensitive or price-elastic. Elasticity is largely driven by customer perception of your product and the competition. The price of the product is either determined to cover the costs, or according to...
- White papers 2003-01-01
- Tax Incidence
- This chapter reviews the concepts, methods, and results of studies that analyze the incidence of taxes. The purpose of such studies is to determine how the burden of a particular tax is allocated among consumers through higher product prices, workers through a lower wage rate, or other factors of production...
- White papers 2002-03-07
- Systematic Risk And Financial Consolidation: Are They Related?
- This article argues that firm interdependencies, as measured by correlations of stock returns, provide an indicator of systematic risk potential. It finds a positive trend in stock return correlations net of diversification effects for a sample of U.S. large and complex banking organizations over 1998-99. The finding suggests that the...
- White papers 2002-03-01
- Pricing and Marketing Rules With Brand Loyalty
- This paper identifies a rule that represents the optimal resolution of this trade-off, in terms of an intuitive modification to the static Lerner rule. It finds that the "effective" price elasticity depends on the discount rate used by the firm, on the rate of depreciation of the clientele through exit...
- White papers 2002-02-11
- The Effect of Tax-Exempt Out-of-Pocket Premiums on Health Plan Choice
- Market-based health care reform proposals typically rely on consumer choice among competing health plans, premiums paid out-of-pocket for higher priced plans, and a significant out-of-pocket premium-price elasticity of health plan choice. The predicted effect is attenuation of the out-of-pocket premium-price elasticity of health plan choice. Using 1994 data from a...
- White papers 2001-11-27
- Flexible Decomposition Of Sales Promotion Effects Using Store-Level Scanner Data
- Recent studies in marketing show decompositions of sales promotion effects based on household-level scanner data. Typically, the total elasticity is decomposed into choice, timing, and quantity elastic ties. This article proposes a model that estimates standard, enhanced, and flexible decompositions based on store-level data. The standard decomposition divides the own-brand...
- White papers 2000-12-15
- How Elastic Is the Firm's Demand for Health Insurance?
- This paper investigates the impact of tax subsidies on the firm's decision to offer insurance, and on conditional firm spending on insurance. The paper finds that the elasticity of offering is driven solely by small firms, for whom the elasticity is much larger, but that spending is more elastic in...
- White papers 2000-11-01
- Credit Constraints in the Market for Consumer Durables
- This paper investigate the empirical significance of borrowing constraints in the market for consumer loans. This paper set up a theoretical model of consumer loan demand, which in the presence of credit rationing implies restrictions on the elasticities of loan demand with respect to the interest rate and the maturity...
- White papers 2000-05-10
Additional Resources
- The Brand Switching Fraction Of Promotion Effects: Unit Sales Versus elasticity Decompositions
- This paper explores the reason for the research literature that focuses on elasticities, it derive analytical expressions that relate the decomposition of unit sales effects to the elasticity decomposition. This paper apply these expressions to obtain estimated unit sales effect decompositions from previously reported elasticity decomposition results. It shows why...
- White papers 2001-08-29
- Tax Bases, Tax Rates and the elasticity of Reported Income
- Tax reforms usually change both tax rates and tax bases. Using a panel of income tax returns spanning the two major U.S. tax reforms of the 1980s and a number of smaller tax law changes, the paper finds that the elasticity of income reported on personal income tax returns depends...
- White papers 2003-10-01
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