Description
elasticity = 1/(1-rho), using the CES convention with rho as the power on inputs inside the aggregator.
An economic model specifies how quantities, prices or marginal values relate under stated assumptions. A derivative, reaction function or first-order-condition term is a local model object rather than an empirical finding or complete equilibrium solution.
elasticity = 1/(1-rho), using the CES convention with rho as the power on inputs inside the aggregator.
When to use this tool
Use Ces Substitution Elasticity Parameter Crosswalk when checking one explicit theoretical economic-model relationship.
How to use the tool and how it works
- Enter rho. Use the units and conventions below.
- Run the tool. Correct any format, range, or cross-field input error before interpreting the output.
- Read elasticity. Use the output convention below.
Require rho < 1. elasticity = 1/(1-rho), using the CES convention with rho as the power on inputs inside the aggregator.1
| Input field | Meaning and units | Accepted input |
|---|---|---|
| rho | CES power parameter under the elasticity = 1/(1-rho) convention. | Required. Finite number; strictly below 1. |
| Output field | Interpretation | Returned shape |
|---|---|---|
| elasticity | Elasticity | Required. Finite number. |
{
"input": {
"rho": 0.5
},
"output": {
"elasticity": 2
}
}Limitations and assumptions
- Other CES parameterizations use different signs or reciprocals. The tool does not estimate rho or handle the excluded rho = 1 limit.
- Inputs must satisfy both the field types and the cross-field conditions above. Invalid input causes an error; a successful false flag or documented placeholder is a different result.
- Numeric calculations use binary floating point unless exact decimal-integer arithmetic is explicitly stated. No hidden measurement tolerance or decimal rounding is added; nonfinite or out-of-contract results are rejected. Numeric signed-zero results are exported as zero.
Alternative or Complementary methods
Use a complete model, defensible parameter estimates and suitable identification before drawing empirical or policy conclusions.
References
Similar or alternative tools
- Cobb Douglas Marginal Rate Substitution Term
mrs = alpha*y/((1-alpha)*x), the positive MUx/MUy magnitude for x^alpha*y^(1-alpha).
- Elasticity Logchange Residual
quantityLogChange = ln(quantityAfter)-ln(quantityBefore); predictedLogChange = elasticity*(ln(priceAfter)-ln(priceBefore)); residual is observed minus predicted.