1. What is Demand Elasticity?

Demand elasticity measures how sensitive the quantity demanded of a good is to changes in its price. It helps businesses and economists understand consumer behavior and make pricing decisions.

2. How Does the Calculator Work?

The calculator uses the demand elasticity formula:

Where:

• \( E \) — Demand elasticity coefficient
• \( \%\Delta Q \) — Percent change in quantity demanded
• \( \%\Delta P \) — Percent 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 Demand Elasticity Calculation

Details: Understanding demand elasticity is crucial for pricing strategies, revenue optimization, and market analysis. It helps determine whether a price change will increase or decrease total revenue.

4. Using the Calculator

Tips: Enter the percent change in quantity demanded and percent change in price as percentages. Both values are required for calculation.

5. Frequently Asked Questions (FAQ)

Q1: What does different elasticity values mean?
A: E > 1 = elastic demand, E = 1 = unit elastic, E < 1 = inelastic demand, E = 0 = perfectly inelastic, E = ∞ = perfectly elastic.

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

Q3: What factors affect demand 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, but typically we use the absolute value since the relationship between price and quantity is usually inverse.

Q5: How is elasticity used in business decisions?
A: Businesses use elasticity to set optimal prices, predict revenue changes, and understand market competitiveness.