1. What is Price Elasticity of Demand?

Price Elasticity of Demand (PED) measures the responsiveness of quantity demanded to changes in price. It quantifies how much the quantity demanded of a good changes when its price changes.

2. How Does the Calculator Work?

The calculator uses the Price Elasticity of Demand formula:

Where:

• \( PED \) — Price Elasticity of Demand coefficient
• \( \%\Delta Q \) — Percentage change in quantity demanded
• \( \%\Delta P \) — Percentage change in price

Explanation: The formula calculates the ratio of percentage change in quantity demanded to percentage change in price, providing the elasticity coefficient.

3. Importance of PED Calculation

Details: Understanding price elasticity helps businesses set optimal pricing strategies, predict revenue changes, and understand consumer behavior in response to price fluctuations.

4. Using the Calculator

Tips: Enter percentage change in quantity demanded and percentage change in price as decimal numbers. Both values are required for calculation.

5. Frequently Asked Questions (FAQ)

Q1: What do different PED values indicate?
A: PED > 1 = elastic demand, PED < 1 = inelastic demand, PED = 1 = unitary elastic, PED = 0 = perfectly inelastic, PED = ∞ = perfectly elastic.

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

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

Q4: Why is PED important for businesses?
A: Helps determine optimal pricing, predict revenue impact of price changes, and understand market competition.

Q5: Can PED be negative?
A: PED is typically expressed as a positive number, though the relationship between price and quantity is inverse (negative).