Business – 8.1 Marketing analysis – Elasticity | e-Consult
8.1 Marketing analysis – Elasticity (1 questions)
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Key limitations include:
- Assumption of ceteris paribus – other factors (income, tastes, prices of related goods) are held constant, which rarely occurs in practice.
- Reliance on accurate data – small errors in quantity or price measurements can cause large errors in elasticity estimates.
- Short‑run vs long‑run differences – demand may be inelastic in the short run but become more elastic over time as consumers adjust.
- Discrete changes – elasticity is a point concept, yet most market data involve discrete price changes, leading to approximation errors.
These limitations mean that elasticity figures should be interpreted cautiously and supplemented with qualitative market analysis.