1. What is Price Elasticity?

Price elasticity measures the responsiveness of quantity demanded or supplied to changes in price. It is a dimensionless coefficient that indicates how much the quantity changes when price changes by 1%.

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 (%)
• \( \%\Delta P \) — Percentage change in price (%)

Explanation: The formula calculates the ratio of percentage change in quantity to percentage change in price, providing a measure of sensitivity to price changes.

3. Importance of Price Elasticity

Details: Price elasticity is crucial for businesses to set optimal pricing strategies, understand consumer behavior, forecast revenue changes, and make informed production decisions.

4. Using the Calculator

Tips: Enter percentage change in quantity and percentage change in price as decimal numbers (e.g., 10% as 10). Both values are required and price change cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What do different elasticity values mean?
A: |E_p| > 1 = elastic, |E_p| < 1 = inelastic, |E_p| = 1 = unitary elastic, E_p = 0 = perfectly inelastic.

Q2: How is percentage change calculated?
A: %Δ = [(New Value - Old Value) / Old Value] × 100%. Use this formula to calculate percentage changes before using the calculator.

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

Q4: Can elasticity be negative?
A: For normal goods, price elasticity of demand is negative (price increase leads to quantity decrease), but we often use absolute value for interpretation.

Q5: How is this used in business decisions?
A: Helps determine optimal pricing, predict revenue impact of price changes, and understand market competitiveness.