A Coefficient of Elasticity Calculator is a specialized tool designed to calculate the responsiveness of one variable to changes in another. It is commonly used in economics to evaluate how demand or supply reacts to changes in factors like price, income, or the price of related goods. This calculator simplifies complex computations, making it practical for businesses, policymakers, and students.
This calculator falls under the economic analysis tool category and is highly beneficial for tasks like price optimization, market analysis, and understanding consumer behavior.
Formula of Coefficient Of Elasticity Calculator
Price Elasticity of Demand (PED)
This measures the responsiveness of quantity demanded to a change in price.
PED = %ΔQ / %ΔP
where:
%ΔQ = Percentage change in quantity demanded
%ΔP = Percentage change in price
Income Elasticity of Demand (IED)
This measures how the quantity demanded responds to changes in income.
IED = %ΔQ / %ΔIncome
where:
%ΔQ = Percentage change in quantity demanded
%ΔIncome = Percentage change in income
Cross-Price Elasticity of Demand (XED)
This calculates the effect of a price change in one good on the quantity demanded of another good.
XED = %ΔQ₁ / %ΔP₂
where:
%ΔQ₁ = Percentage change in quantity demanded of good 1
%ΔP₂ = Percentage change in price of good 2
Price Elasticity of Supply (PES)
This measures how quantity supplied changes in response to a price change.
PES = %ΔQ / %ΔP
where:
%ΔQ = Percentage change in quantity supplied
%ΔP = Percentage change in price
Elasticity Classifications
- |E| = 0: Perfectly inelastic
- 0 < |E| < 1: Relatively inelastic
- |E| = 1: Unit elastic
- |E| > 1: Relatively elastic
- |E| = ∞: Perfectly elastic
Elasticity Table
Here is a table to help users quickly understand common elasticity values and their implications without performing calculations:
| Elasticity Value | Interpretation | Example |
|---|---|---|
| E | = 0 | |
| 0 < | E | < 1 |
| E | = 1 | |
| E | > 1 | |
| E | = ∞ |
Example of Coefficient Of Elasticity Calculator
A company sells a product for $10, and the price increases to $12. As a result, the quantity demanded drops from 100 units to 80 units. Calculate the price elasticity of demand.
Step 1: Calculate percentage changes
%ΔQ = [(80 – 100) / 100] × 100 = -20%
%ΔP = [(12 – 10) / 10] × 100 = 20%
Step 2: Use the formula for PED
PED = %ΔQ / %ΔP = -20% / 20% = -1
Interpretation: The demand is unit elastic, meaning the percentage change in quantity demanded equals the percentage change in price.
Most Common FAQs
Elasticity helps businesses understand consumer sensitivity to price changes, guiding pricing strategies, and optimizing revenue.
Cross-price elasticity shows whether goods are substitutes or complements. A positive value indicates substitutes, while a negative value indicates complements.
Income elasticity helps predict how changes in consumer income impact demand, which is crucial for forecasting and product planning.