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#calculating-demand-elasticity-from-demand-function #cfa #cfa-level-1 #economics #microeconomics #reading-13-demand-and-supply-analysis-introduction #study-session-4

Although the concept of different elasticities of demand is helpful in sorting out the qualitative and directional effects among variables, the analyst will also benefit from having an empirically estimated demand function from which to calculate the magnitudes as well. There is no substitute for actual observation and statistical (regression) analysis to yield insights into the quantitative behavior of a market. (Empirical analysis, however, is outside the scope of this reading.) To see how an analyst would use such an equation, let us return to our hypothetical market demand function for gasoline in Equation 13 duplicated here:

Equation (27)

Qdx=8,400−400Px+60I−10Py

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**4.5. Calculating Demand Elasticities from Demand Functions**

Although the concept of different elasticities of demand is helpful in sorting out the qualitative and directional effects among variables, the analyst will also benefit from having an empirically estimated demand function from which to calculate the magnitudes as well. There is no substitute for actual observation and statistical (regression) analysis to yield insights into the quantitative behavior of a market. (Empirical analysis, however, is outside the scope of this reading.) To see how an analyst would use such an equation, let us return to our hypothetical market demand function for gasoline in Equation 13 duplicated here: Equation (27) Qdx=8,400−400Px+60I−10Py As we found when we calculated own-price elasticity of demand earlier, we need to identify “where to look” by choosing actual values for the independent variables, P x , I,

Although the concept of different elasticities of demand is helpful in sorting out the qualitative and directional effects among variables, the analyst will also benefit from having an empirically estimated demand function from which to calculate the magnitudes as well. There is no substitute for actual observation and statistical (regression) analysis to yield insights into the quantitative behavior of a market. (Empirical analysis, however, is outside the scope of this reading.) To see how an analyst would use such an equation, let us return to our hypothetical market demand function for gasoline in Equation 13 duplicated here: Equation (27) Qdx=8,400−400Px+60I−10Py As we found when we calculated own-price elasticity of demand earlier, we need to identify “where to look” by choosing actual values for the independent variables, P x , I,

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