1. What is Price Elasticity?

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It indicates how sensitive consumers are to price changes for a particular good or service.

2. How Does the Calculator Work?

The calculator uses the price elasticity formula:

Where:

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

Explanation: The formula calculates the ratio of percentage change in quantity to percentage change in price, showing how demand responds to price variations.

3. Importance of Price Elasticity

Details: Understanding price elasticity helps businesses set optimal pricing strategies, predict revenue changes, and understand market dynamics. It's crucial for pricing decisions and revenue management.

4. Using the Calculator

Tips: Enter percentage change in quantity 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 = unit elastic, E_p < 1 = inelastic demand, E_p = 0 = perfectly inelastic.

Q2: How is percentage change calculated?
A: %Δ = [(New Value - Old Value) / Old Value] × 100%

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

Q4: Why is elasticity important for businesses?
A: Helps determine optimal pricing, predict revenue changes, and understand competitive positioning.

Q5: Can elasticity be negative?
A: Yes, but typically we use absolute value. Negative sign indicates inverse relationship between price and quantity.