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See my sibling comment: figure out how much inelastic demand there is for a good-category, rebate that amount off of all prices using necessity-dollar allocation, and then whatever's left over is the true nicety-dollar (i.e. elastic demand) cost.

One interesting effect of this is that if you calculated it per-market, then different goods would have different inelastic-demand floors in different markets. In e.g. Vancouver, where tiny one-bedroom detached homes can cost >$1mm, there'd be a pretty large necessity-dollar allocation for rent/mortgage. In Cleveland, where houses go for $65k, it'd be much lower.

You might not want this effect—you might want to incentivize people to move to cheaper markets instead. But the network-effect of cities is another of those things economic incentives just don't seem to work very well to treat.




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