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

A: Well, in this case, what I'm going to do, this is coming at the end, but what I'm going to do is measure the system of equations and then I'm going to 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 just think of this as some type of measurement of how sensitive is the category to price changes. The point is that 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 where the thermometer is filled all the way up, this store is in Arlington Heights, in that case, 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. Now 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 are blue and then the middle tier are the red ones. Yes?

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