Elasticities

The article of “Cross-Price Elasticities of Demand Across 114 Countries” written by Anita Regmi and James L Seale, Jr, estimates cross-price elasticities based on nice categories such as food, beverage, and tobacco; clothing and footwear; education; gross rent, fuel, and power; house furnishings and operations; medical care; recreation; transport and communications; and “other” items.Furthermore, cross-price elasticities are also calculated and reported for a two-good demand system based upon food and non-food.
It is stated that if price increases in goods and services there is less income and it may cause reverse in gains, nutrition and welfare particularly in poor nations’ population.
Cournot elasticity occurs when the existing level of income stays constant, with no money added tocover the good’s increased price while the Slutsky elasticity occurs when the real level of income stays constant, compensated by an amount equivalent to the price rise of the good.
Additionally, on non-food goods, when the price of one of the nine goods rises, the demand increases for the other 8 goods. Whereas in necessity goods, when a price increases the demand for all the other 8 goodsdeclines.
An interesting point covered in this article situates the way to calculate the elasticities according to the most important consumption categories from the ICP (International comparison Program) data across this 144 countries, and the demands line according to the goods and services variation, and how it provides the two-good demand system the nonfood and food items, to know if a product orservice can replace a cheaper for another more expensive.
Some of the main themes from the article refer as:
°Primarily, USA was the comparison crux of the research.
° The countries that we can see on the low category are from the African continent, and with this we can reaffirm the abject poverty of those countries.
° The techniques and formulas that the ICP used to know the real percentageof the incomes of every country. The main technique is the comparison between the absolute prices and the relative ones.
° Mexico is on the middle category and with this we can see that our country is on development channels.

In the event that all countries have the same prices, quadratic and cubic terms disappear, leaving the linear term. The cubic term is established on substitution andrecognizes that consumers don’t guzzle the same quantities, although it can react to a higher price for the replacement of goods to one that is relatively cheaper.
Moreover, Frisch price index shows price currencies, there is an existence of three types of price elasticities: Frisch, Slutsky and Cournot which are different because they depend on income and price change. The price elasticity ofFrisch is the income of the consumer after a change in the price.
The article calculated based on these elasticities model of Florida and begins to estimate the per capita income in all countries but in relation to the United States.
In countries with per capita income levels of about 13 percent less than the USA the Courtnot elasticities are positive, indicating that income effect is smaller thansubstitution effect. This means that when nonfood price rises expenditures of food are expected to increase. In the contrary, in these countries the ones with a greater per capita income the Courtnot elasticities are negative.
Between 1980 and 1996, middle income Countries like Argentina, Hungary, Poland, Chile and Brazil had lower relative real percapita income in 1996 than in 1980 while otherslike Greece, South Korea, Portugal and others had significant increases.
.Cross-Price Elasticities in a Nine-Good Demand System
Within a country grouping, the Slutsky cross-price elasticities for the nine-good demand system are larger for luxury items than for the two necessities. Also when prices change with respect to necessities, the Slutsky cross-price elasticities are greatest among...