Estimating Aggregate Automotive Income Elasticities From the Population Income-Share Elasticity

Abstract

The conventional approach to estimating the income responsiveness of a product's sales involves collecting data on sales as a function of income and product prices and then estimating a demand model. In many cases, it is very difficult to either collect the required data or reliably estimate the demand model. This article develops an alternative approach toward estimating these income-responsiveness parameters using only the average income of the product's buyers and the population income distribution. We illustrate our technique with automotive data and obtain fairly intuitive results.

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