What is Elasticity of price expectations?

Answer 1

( price ) elasticity of price expectation :- The elasticity of price expectations is defined as the change in future prices expected as a result of current price changes. When this exceeds unity, it indicates that buyers expect future prices to rise ( or fall) more than current prices have changed. The elasticity is particularly useful in estimating demand in an inflationary environment. A positive coefficient, particularly if it is greater than unity, suggest that current price increase may shift the demand function to the right, which may result in the same or greater sales at the higher prices while consumers try to beat the expected price increases by building up stocks. Eventually, however, the large inventory accumulated by the consumers try to beat the expected price increases by building up stocks. Eventually , however, the large inventory accumulated by the consumer, or a competitor's reactions, will tend to lower the elasticity perhaps even turning it negative , & will result in shifting the demand curve to the left. from kadambari (Ur helpful friend)