Is elasticity purely an aggregate concept or can it be individualized?
First question here. I am not an economist by training, but I do quite a bit of econometric analysis in my job (my background is maths). I often get asked about elasticity, and I am familiar with several different ways of calculating elasticity. My question is this: in the price-volume relationship for elasticity, does it make sense to ask about elasticity for individual customers, or is elasticity properly understood to be an aggregate (market) concept. Is it possible to build an elasticity model for individual customers. For clarification, these customer typically purchase thousands of units every month (these are B2B sales, not B2C). Or is there something fundamental about elasticity that makes it intrinsically aggregate. I have seen some discussion in the literature about individual customer elasticity, but the literature seems to be fairly sparse, so I am not sure how much to trust it.
The market elasticity wil be a market share weighted average of the individual elasticities. If Joe has price elaticity of -2 and Fred has price elasticity of -1 and buys 200 and Fred buys 100 then the market elasticity will be (-2)*(2/3) + (-1)*(1/3) - = -5/3 a 1% increase in price will lead to a 1.67% reduction in sales.
