1. What is the Coefficient of Price Elasticity?

The coefficient of price elasticity (E_p) measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded changes when the price changes by one percent.

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, indicating how sensitive demand is to price changes.

3. Importance of Price Elasticity Calculation

Details: Price elasticity is crucial for businesses to set optimal pricing strategies, understand market demand, 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. Both values must be valid (non-zero for price change).

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 how price changes affect total revenue and guides pricing strategies for profit maximization.

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

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

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