I estimate investor demand elasticity when firms respond to flow-driven prices they also move, and trace what it implies for capital misallocation. Using a shift-share design, I show that a one-standard-deviation mutual fund flow shock raises stock prices by 1.9% and equity issuance by 0.2% of assets, funding investment and deleveraging. In a dynamic model where firms and investors jointly determine the price each acts on, market clearing splits market value into fundamental value and price pressure. Because issuance raises fundamental value, observed market value blends price pressure with the improvement it triggers, which accounts for 17% of the initial price response; separating the two raises the estimated elasticity from 1.3 to 1.6. That elasticity is not a single number but source-, size-, and state-dependent, and that structure determines its real consequences. The correction closes little of the distance to perfectly elastic demand, so price pressure should give firms ample incentive to over- or under-invest. Yet demand-side counterfactuals move aggregate TFP far less than a modest reduction in real capital adjustment costs.
