1. What is Economic Elasticity?

Economic elasticity measures the responsiveness of one economic variable to changes in another variable. It quantifies how much the quantity demanded or supplied changes when price or other factors change.

2. How Does the Calculator Work?

The calculator uses the elasticity formula:

Where:

• \( E \) — Economic elasticity (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 responsiveness.

3. Importance of Elasticity Calculation

Details: Elasticity is crucial for understanding market behavior, setting pricing strategies, predicting consumer responses, and making informed business decisions.

4. Using the Calculator

Tips: Enter percentage change in quantity and percentage change in price as decimal values. Both values must be valid numbers.

5. Frequently Asked Questions (FAQ)

Q1: What do different elasticity values mean?
A: |E| > 1 = elastic, |E| < 1 = inelastic, |E| = 1 = unit elastic. Elastic means quantity is very responsive to price changes.

Q2: What are common types of elasticity?
A: Price elasticity of demand, price elasticity of supply, income elasticity, cross-price elasticity.

Q3: Why is elasticity important for businesses?
A: Helps determine optimal pricing, predict revenue changes, and understand market competition.

Q4: What factors affect elasticity?
A: Availability of substitutes, necessity vs luxury, time period, proportion of income spent.

Q5: Can elasticity be negative?
A: Yes, for normal goods, price elasticity of demand is negative (inverse relationship between price and quantity).