Chapter 7 – Empirical Demand Functions. Optimal pricing is critical to the success of any business. Given the stakes, it is frequently worth investing significant resources in determining the optimal price.
Best guide to choosing IVs is to turn to theory.
Price expectations and tastes and preferences are often
dropped due to the difficulty of measuring or estimating them.
Own Price Elasticity
Cross Price Elasticity
lnQ = ln a + b ln P + c ln M + d ln PR + e ln N
Pc is the price of crude oil