Interpreting economic data: estimating the elasticity of demand

The concept of elasticity of demand is one of the most important in economics. At its\nmost general level the elasticity of demand measures the percentage response in demand\nto a given percentage change in some other variable of interest. For example, we are\noften interested in the response of demand to changes in the price of the good concerned\nprice – the own price elasticity of demand – but we may also be interested in the response\nto changes in income – the income elasticity of demand – or changes in the prices of other\ngoods – the cross price elasticity of demand. In a recent article for the Economic Review,\nMark Russell shows how useful the concept of elasticity of demand can be for both\neconomists and the business community. He also shows how demand elasticities can be\ncalculated and gives examples of how they might be used in practice...