The Cyclical Behavior of Price Elasticity of Demand

The Cyclical Behavior of Price Elasticity of Demand

Empirical evidence is provided of a procyclical behavior of price elasticity demand for a panel of 38 US food manufacturing industries from 1972 to 1987. Given the inverse relationship of the market elasticity of demand to price-cost margin, the findings lend support to studies that have identified...

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Veröffentlicht in:Southern economic journal 1997-07, Vol.64 (1), p.118-129
Hauptverfasser: Field, Martha K., Pagoulatos, Emilio
Format: Artikel
Sprache:eng
Schlagworte:
Business cycles
Competition
Consumer Price Index
Consumers
Consumption
Costs
Customers
Economic fluctuations
Economic statistics
Economic theory
Elasticity of demand
Food
Food industries
Food processing industry
Hypotheses
Imports
Industrial concentration
Interest rates
International trade
Manufacturing
Manufacturing industries
Price elasticity
Price elasticity of demand
Profit margins
Statistical analysis
Studies
Variables
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Beschreibung
Zusammenfassung:Empirical evidence is provided of a procyclical behavior of price elasticity demand for a panel of 38 US food manufacturing industries from 1972 to 1987. Given the inverse relationship of the market elasticity of demand to price-cost margin, the findings lend support to studies that have identified countercyclical behavior of price-cost margins. The findings show a negative influence of seller concentration, advertising and capital intensity on price elasticity. Sellers in industries with greater concentration and more advertising-induced product differentiation may achieve a more inelastic product. International trade influenced price elasticity of demand only when the model accounted for the business cycle.
ISSN:0038-4038
2325-8012
DOI:10.1002/j.2325-8012.1997.tb00010.x