Most textbooks suggest that the price elasticity of demand function is linear. However, suggestions have been made that it is in fact non-linear. Are there any references to empirically based articles demonstrating that this function in most commonly non-linear?
Reviewing the abstracts of the subsequent articles, I recognized that the researchers have indicated that the price elasticity of demand function may be non-linear in various scenarios. Please let me know if I misunderstood any aspect of your questions. Thank you!
Aalami, H. A., Pashaei-Didani, H., & Nojavan, S. (2018). Deriving nonlinear models for incentive-based demand response programs. International Journal of Electrical Power & Energy Systems, 106, 223–231. https://doi.org/10.1016/j.ijepes.2018.10.003
Contoyannis, P., Hurley, J., Grootendorst, P., Jeon, S., & Tamblyn, R. (2005). Estimating the price elasticity of expenditure for prescription drugs in the presence of non‐linear price schedules: an illustration from Quebec, Canada. Health Economics, 14(9), 909–923. https://doi.org/10.1002/hec.1041
Faria, P., & Vale, Z. (2011). Demand response in electrical energy supply: An optimal real time pricing approach. Energy, 36(8), 5374–5384. https://doi.org/10.1016/j.energy.2011.06.049
Perhaps Conference Paper Modeling Price Elasticity for Occupancy Prediction in Hotel ...
may provide some insights?
Nothing is linear in world except for basic laws of science. Mostly multiple factors influence any phenomenon and hence everything is non linear.
Power Law Relationships (Y = aX^b): Found in natural and social systems, such as city populations, wealth distribution (Pareto principle), and earthquake magnitudes.
Exponential Growth/Decay (Y = a e^(bX)): Common in radioactive decay, population growth, and some financial models.
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