Confidence Intervals for Elasticities and Flexibilities from Linear Equations

Information regarding the precision of elasticity and flexibility estimates from equations linear in original variables is typically missing from empirical studies. A result due to Fieller which allows construction of exact confidence intervals for elasticities and flexibilities from such equations is demonstrated. Exact confidence intervals are not necessarily narrowest at mean levels nor are they symmetric about the point estimates of the elasticities and flexibilities. Empirical examples indicate that exact 95 percent confidence intervals for price flexibilities for food items can be quite wide.