1. What is Price Elasticity?

Price elasticity of demand (E_p) measures the responsiveness of quantity demanded to changes in price. It indicates how much the quantity demanded changes when the price changes by 1%.

2. How Does the Calculator Work?

The calculator uses the price elasticity formula:

Where:

• \( E_p \) — Price elasticity of demand (dimensionless)
• \( \%\Delta Q \) — Percentage change in quantity demanded (%)
• \( \%\Delta P \) — Percentage change in price (%)

Explanation: The formula calculates the ratio of the percentage change in quantity demanded to the percentage change in price.

3. Importance of Price Elasticity

Details: Price elasticity helps businesses determine optimal pricing strategies, forecast revenue changes, and understand consumer behavior in response to price fluctuations.

4. Using the Calculator

Tips: Enter percentage change in quantity demanded and percentage change in price as decimal numbers. Both values are required for calculation.

5. Frequently Asked Questions (FAQ)

Q1: What do different elasticity values mean?
A: |E_p| > 1: Elastic demand; |E_p| < 1: Inelastic demand; |E_p| = 1: Unit elastic demand.

Q2: Why is price elasticity important for businesses?
A: It helps determine if price changes will increase or decrease total revenue and guides pricing decisions.

Q3: What factors affect price elasticity?
A: Availability of substitutes, necessity vs luxury, time period, and proportion of income spent on the good.

Q4: Can elasticity be negative?
A: Yes, price elasticity is typically negative due to the inverse relationship between price and quantity demanded.

Q5: How is percentage change calculated?
A: %Δ = [(New Value - Old Value) / Old Value] × 100%