What is GDP elasticity and how does it affect economic predictions?

[Mercator]

Hello, hope this is the right place for my question;
Someone can help me with this one? I have got the results of a study about the growth of the chemical industry in a certain region. I got in discussion with the authors of the study because I saw that certain chemical projects which will come on stream in the future are not reflected in the projected figures.
Their answer was that they used a scientific prdicting method based on "GDP elasticity". Can anybody explain me the basics of this?

Keep it simple please! Thanks a lot!

 

[Gokul43201]

Typically, Elasticity in supply/demand is defined as the percentage change in the quantity supplied/demanded resulting from a given percentage change in the price of the commodity.

I'm not sure what GDP Elasticity is, but I'll guess that it is a percentage change in the contribution to the GDP resulting from a changing price.

If x% change in price causes and x% change in supply/demand, the commodity is said to be unit (or unitary ?) elastic.

If you draw the supply demand curves on a logarithmic scale, a low slope represents a high elasticity.

That's all I can tell you...wait a little bit for the experts to come along. I may be completely on the wrong track.

 

[Mercator]

Thanks, its a start!

 

[Nereid]

Moving this to Social Sciences (which includes Economics) - where's Njorl?

 

[Gokul43201]

Moving this to Social Sciences (which includes Economics) - where's Njorl?

I get the feeling this thread would have fared better in Gen. Disc. or Politics. I know that many of the folks that are regulars in the Politics and World Affairs section are quite knowledgeable in economics, and most of them will also browse thru Gen Disc.

I haven't seen Njorl in like ages now.

 

[Impossible?]

Surely it is the responsiveness of agreggate demand/ supply to inflation?

 

[selfAdjoint]

When in doubt, google. Here is a little tutorial on elasticity. Scroll down to elasticity of macroeconomic variables and you will see that GDP can have elasticity with respect to a number of variables.

 

[davidmerritt]

Hello, hope this is the right place for my question;
Someone can help me with this one? I have got the results of a study about the growth of the chemical industry in a certain region. I got in discussion with the authors of the study because I saw that certain chemical projects which will come on stream in the future are not reflected in the projected figures.
Their answer was that they used a scientific prdicting method based on "GDP elasticity". Can anybody explain me the basics of this?

Keep it simple please! Thanks a lot!

GDP elasticity in the context you mention it would be in the form

% change in GDP / % change in chemcal projects ( probably measure in $)

they would (should) have projected the impact of future chemical projects based on a calculated elasticity using available data. The elasticity could be used in a regression to better estimate the growth of the chemical industry in a region.

If you constructed a regression in the form
where y is the value of

y = Const + 0.12RegGDP + 0.0016PChemProd


then you could construct another variable around the amount invested in new chemical projects adding something like 0.00012AnnRegChemInvst where the 0.00012 would be the elasticity in question (AnnRegChemInvst would be the monetary value of the certain chemical projects you mention). Giving

y = Const + 0.12RegGDP + 0.0016PChemProd + 0.00012AnnRegChemInvst




Something like anyways

David

 

[Tom McCurdy]

http://en.wikipedia.org/wiki/Elasticity_(economics)

search for the different types of elasticity you want to deal with... I would always check wikipedia first... its the go to source on... everything