Price Elasticity

In economics, Price Elasticity is a measure of how much sensitive the demand or supply of a product is to the change in the price. But in marketing, Price Elasticity is a measure of how much sensitive the consumers are due to the change in price of a product.

Measuring of Price Elasticity is a very important aspect of every business, as it gives the answers to possibly these questions:

• If you will lower the price of a product, how much more will you sell?
• If you raise the price of one product, how will that affect the sales of the other products?
• If the market price of a product goes down, how much will that affect in the amount that firms will be willing to supply to the market?

In this article, I will use a linear regression model to estimate the price elasticity of demand, I will also use statistical modelling to estimate our models using python. Let’s start with the data exploration:

Data Exploration

Now let’s import the some standard libraries and have a look at the dataset:

from __future__ import print_function
from statsmodels.compat import lzip
import numpy as np
import pandas as pd
import matplotlib.pyplot as plt
import statsmodels.api as sm
from statsmodels.formula.api import ols
beef = pd.read_csv('beef.csv')
beef.head(10)

#data science #python #statistics