Price point elasticity = % change in F / % change in price= dlog F/ dLog P
Question:
Price point elasticity = % change in F / % change in price= dlog F/ dLog P for household furniture
Price can be approximated by P
Taking logs of the given demand function we get a log log function. In this the coefficient itself is the elasticity value.
dLog F/dLog p = -0.48
income elasticity = dlogF/ dlog Y= +1.08
R refers to the elasticity of expenditures on furniture with respect to private residential construction /household.
The value of .16 shows that when households raise their expenses on building a private house by 100% their expenses on furniture rises by 16%
This was included since the owners/ builders of private houses area large part of the demand for new furniture.
Based on the above - If you were a supplier to the furniture manufacturer would you have preferred to see the analysis performed in physical sales units rather than dollars of revenue? How would this change alter the interpretation of the price coefficient, presently estimated as -.48?
