Automobile demand studies have used both cross-sectional and time-series analysis
with aggregate and disaggregated data. Studies have been undertaken for the
entire market, market segments (domestic vs. foreign), and particular brands of
automobiles. Thus, given the differences in data sets, the functional forms of the
estimating equations, and the variables included, we would expect to find a range
of elasticity estimates in these studies. Aggregate time-series studies generally estimate
market automobile price elasticities to be less than 1 in absolute value and
income elasticities to be greater than +2.00, indicating a lack of sensitivity to price
for automobiles as a commodity, but a strong sensitivity in the demand for automobiles
to changes in income. The disaggregated cross-sectional studies found price
elasticities for particular vehicle types ranging from –0.51 to –6.13. The large elasticities
at the upper end of the range should not be surprising, given the degree of
substitution between different brands of cars.