ECON 3411 Lecture Notes - Lecture 15: Regression Analysis, Marginal Revenue, Statistical Significance
19 Jan 2018
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Document Summary
The elasticity concept: own price elasticity of demand. Factors affecting the own price elasticity of demand. Marginal revenue and the own price elasticity of demand: cross-price elasticity. Nonlinear demand functions: obtaining elasticities from demand functions. Elasticities for nonlinear demand functions: regression analysis. Regression for nonlinear functions and multiple regression. Introduction: chapter 2 focused on interpreting demand functions in qualitative terms: An increase in the price of a good leads quantity demanded for that good to decline. A decrease in income leads demand for a normal good to decline. This chapter examines the magnitude of changes using the elasticity concept, and introduces regression analysis to measure different elasticities. Measures the responsiveness of a percentage change in one variable resulting from a percentage change in another variable. The elasticity between two variables, and , is mathematically expressed as: when a functional relationship exists, like = (), the elasticity is: Sign of the relationship: positive, negative.
