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Elasticities in AIDS Models

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  • Richard Green
  • Julian M. Alston

Abstract

In the literature, a variety of approaches have been used to calculate demand elasticities in almost ideal demand system (AIDS) models of demand. It is common to estimate the linear approximate almost ideal demand system (LA/AIDS) instead of the AIDS. When the LA/AIDS is estimated, all of the previously reported approaches to compute elasticities are theoretically incorrect. This paper presents correct formulas for LA/AIDS elasticities and illustrates the potential errors from using incorrect computing formulas.

Suggested Citation

  • Richard Green & Julian M. Alston, 1990. "Elasticities in AIDS Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(2), pages 442-445.
    • Handle: RePEc:oup:ajagec:v:72:y:1990:i:2:p:442-445.
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    File URL: http://hdl.handle.net/10.2307/1242346
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