Worked-example setupScope and assumptions
- Cedar is original fiction; the two endpoints describe the same household segment, service, real-income definition, annual quantity, and held-constant own and related prices.
- The coefficient is a stipulated teaching relationship, not an estimate from observed households or a causal design.
- Normal-good classification applies only to this direction, range, population, and period.
- Period
- Two comparable fictional annual scenarios
- Units
- Constant-price USD per household; annual service units per household; unit-free elasticity
- Rounding
- Full precision internally; elasticity displayed to four decimals
Cedar's fictional planning packet holds service price and other modeled demand determinants fixed. Real household income rises from $50,000 to $55,000, and annual service demand rises from 100 to 108 units.
| Component | Change | Midpoint | Proportional change |
|---|---|---|---|
| Service units | 8 | 104 | 7.6923% |
| Real household income | $5,000 | $52,500 | 9.5238% |
income elasticity = 7.6923% / 9.5238% = +0.8077
The positive sign supports a normal-good relationship for this service in this segment and range. Magnitude below one means demand changes proportionally less than the defined income measure. It does not mean the service is a necessity, high quality, socially preferred, or normal for every household.
Keep the evidence posture honest
The packet stipulates a held-constant relationship; it does not observe two randomized populations. If the numbers came from different years, price level, age, location, household size, employment, tastes, and credit access could also change. A causal income claim would require a design that addresses those paths.
For planning, Cedar would still need a supported income scenario, market size, own and related prices, capacity, competitors, costs, uncertainty, and decision authority. Multiplying the coefficient by a forecast is not a complete sales, revenue, profit, or cash model.
Verified calculation · economics foundations analysis
The curriculum loader recomputed this example before it entered the site build. Expand any structured input to inspect the stated facts.
- midpoint elasticities
- 1 field
Inspect data
{
"cedar_service_income": {
"driver_end": 55000,
"driver_name": "real_household_income_usd",
"driver_start": 50000,
"relationship": "income_demand",
"response_end": 108,
"response_name": "annual_service_units_per_household",
"response_start": 100
}
}Recomputed result
| Measure | Value |
|---|---|
| driver midpoint | 52,500 |
| driver proportional change | 0.0952 |
| inelastic | 1 |
| positive signed elasticity | 1 |
| response midpoint | 104 |
| response proportional change | 0.0769 |
| signed elasticity | 0.8077 |