1. What is Elasticity?

Elasticity measures the responsiveness of one variable to changes in another variable. In economics, it typically refers to how much the quantity demanded or supplied changes in response to price changes.

2. How Does the Calculator Work?

The calculator uses the basic elasticity formula:

Where:

• \( E \) — Elasticity coefficient (dimensionless)
• \( \%\Delta Quantity \) — Percentage change in quantity (%)
• \( \%\Delta Price \) — Percentage change in price (%)

Explanation: The formula calculates how sensitive the quantity is to price changes. A value greater than 1 indicates elastic demand, less than 1 indicates inelastic demand, and equal to 1 indicates unit elasticity.

3. Importance of Elasticity Calculation

Details: Understanding elasticity helps businesses set optimal prices, governments design effective tax policies, and economists analyze market behavior and consumer responsiveness.

4. Using the Calculator

Tips: Enter percentage changes as decimal numbers (e.g., 10% as 10, -5% as -5). Ensure the price change is not zero to avoid division by zero errors.

5. Frequently Asked Questions (FAQ)

Q1: What does different elasticity values mean?
A: |E| > 1 = elastic (quantity changes more than price), |E| < 1 = inelastic (quantity changes less than price), |E| = 1 = unit elastic.

Q2: What are common types of elasticity?
A: Price elasticity of demand, price elasticity of supply, income elasticity, and cross-price elasticity.

Q3: Why is elasticity important for businesses?
A: It helps determine how price changes will affect total revenue and market share.

Q4: What factors affect elasticity?
A: Availability of substitutes, necessity vs luxury, time period, and proportion of income spent.

Q5: Can elasticity be negative?
A: Yes, for normal goods, price elasticity of demand is negative (inverse relationship between price and quantity).