Some Observations on Interpreting Measured Demand Elasticities

The purpose of this paper is to relate some of the problems encountered in measuring price and income elasticities to the interpretation of these measurements. Since this material is familiar to the demand analyst, the paper is addressed to users of elasticities. It draws heavily on empirical literature in demand analysis to indicate the relationship of empirical procedures to interpretation of results. The discussion should aid users of elasticities in reconciling some of the diverse estimates of a particular elasticity and be of assistance in choosing a relevant elasticity for specific decisionmaking problems.