Q: How do you measure elasticity? Do you average over prices?

A: Well, in this case, this is coming at the end, but what I'm going to do is measure the system of equations and then go back and pose the questions to my models.

Suppose that I increase all the prices by 1%, what would be the effect of percentage change in total for the category? What I really want to emphasize is that we think of this as some type of measurement of how sensitive the category is to price changes. In this case, the price elasticity is around -2. So if I were to go out and increase the price of all the brands by 1%, total movement will drop by 2%. In this store in Arlington Heights where the thermometer is filled all the way up, it's a more posh suburb, it's more yuppy. If I were to increase the price by 1%, my movement wouldn't change. So my elasticity is close to zero. Also, to help codify these things and make it a little easier, I've made the least sensitive third of the stores yellow and the most sensitive third of the stores blue. The middle tier are the red ones. Yes?

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