How do I calculate price elasticity?

How do I calculate price elasticity?

To calculate price elasticity of demand, you can use the formula: % Change in Quantity Demanded / % Change in Price.

Can you give me an example of how to use that formula?

Sure! If the price of a product increases from $10 to $12 and the quantity demanded decreases from 100 to 80, the calculation would be:

1. % Change in Price = (12-10)/10 * 100 = 20%
2. % Change in Quantity = (80-100)/100 * 100 = -20%

So, Price Elasticity = -20% / 20% = -1.0.

What does a price elasticity of -1.0 mean?

A price elasticity of -1.0 indicates unitary elasticity, meaning the percentage change in quantity demanded is equal to the percentage change in price.

Are there different types of price elasticity?

Yes, there are several types: elastic, inelastic, unitary, perfectly elastic, and perfectly inelastic, each describing how quantity demanded responds to price changes.