4 ms·
A fine example of the price elasticity of demand. Not surprising in the slightest, but a helpful real-world illustration.
by carbocation 15y ago
A fine example of the price elasticity of demand. Not surprising in the slightest, but a helpful real-world illustration.
- apu 15y agoActually, I found it surprising because almost all theoretical economic models seem so divorced from reality that nothing ever works as you expect.
- chimeracoder 15y ago"All models are wrong, but some models are useful". Even though the axioms (assumptions) for rational choice are rarely met completely in practice, understanding their implications were they to be met is still highly useful.
- jessriedel 15y agoWell, it means that the demand curve (units demanded as a function of price) is proportional to 1/price for a large range. That seems pretty unusual, since the general idea of price elasticity is compatible with any curve decreasing with price, i.e. 1/price^2, 1/sqrt(price), 1/e^price, etc.
- carbocation 15y agoThank you; you're right. It's not surprising that there is some relationship, but what is actually surprising is that the relationship would so closely match an idealized, particular relationship (unitary elastic demand). (And this should have been obvious to me, since the general use of the demand curve is not, by any means, to prove to people that the price they choose doesn't matter.) I'd edit my original post if I were still within the edit window.