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Demand Elasticities: Supplements to Sales Budget Variance Reports.

The Accounting Review 1983 58(1), 143-156
A major limitation of traditional sales and profit variance analysis is that it neglects price-quantity relationships for firms not operating under conditions of perfect competition. This paper shows how data from sales and gross profit reports can be used to estimate price elasticities and cross elasticities of demand. Finally, the relationship of price elasticity to profit maximization is developed for a simple case.