1. What is the Elasticity Coefficient?

The Elasticity Coefficient measures the responsiveness of quantity demanded or supplied to changes in price. It quantifies how much the quantity changes when the price changes by 1%.

2. How Does the Calculator Work?

The calculator uses the elasticity coefficient formula:

Where:

• \( E \) — Elasticity coefficient
• \( \%\Delta Quantity \) — Percentage change in quantity
• \( \%\Delta Price \) — Percentage change in price

Explanation: The formula calculates the ratio of percentage change in quantity to percentage change in price, indicating the sensitivity of demand or supply to price changes.

3. Importance of Elasticity Coefficient

Details: Understanding price elasticity helps businesses set optimal pricing strategies, predict revenue changes, and understand market dynamics. It's crucial for economic analysis and business decision-making.

4. Using the Calculator

Tips: Enter percentage change in quantity and percentage change in price as decimal numbers. Both values must be valid numbers, and price change cannot be zero.

5. Frequently Asked Questions (FAQ)

Q1: What do different elasticity values mean?
A: |E| > 1 = elastic, |E| < 1 = inelastic, |E| = 1 = unit elastic. Positive E indicates normal goods, negative E indicates inferior goods.

Q2: How is percentage change calculated?
A: %Δ = [(New Value - Old Value) / Old Value] × 100%. Use the resulting percentage in this calculator.

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

Q4: Can elasticity be negative?
A: Yes, for normal goods the relationship between price and quantity is inverse, resulting in negative elasticity.

Q5: How is elasticity used in business?
A: For pricing strategies, revenue forecasting, tax incidence analysis, and understanding consumer behavior patterns.