Price Elasticity of Supply and Demand Calculator
This calculator evaluates the responsiveness of supply or demand to changes in price. It's a key economic tool for understanding consumer and producer behavior, optimizing pricing strategies, and forecasting market reactions.
Supply and Demand Elasticity Calculator
Price Elasticity Formulas
$$E_d = \frac{\%\ \text{Change in Quantity Demanded}}{\%\ \text{Change in Price}} = \frac{\left( \frac{Q_2 – Q_1}{Q_1} \right)}{\left( \frac{P_2 – P_1}{P_1} \right)}$$
$$E_s = \frac{\%\ \text{Change in Quantity Supplied}}{\%\ \text{Change in Price}} = \frac{\left( \frac{Q_2 – Q_1}{Q_1} \right)}{\left( \frac{P_2 – P_1}{P_1} \right)}$$
Explanation:
Both formulas calculate how much quantity demanded or supplied changes in response to price changes. A result $$>1$$ indicates elasticity (sensitive to price), $$<1$$ indicates inelasticity.
Price elasticity is essential in economics and business for:
- Setting optimal prices
- Analyzing taxation effects
- Predicting consumer response
- Assessing production flexibility
Example (Demand):
- $$Q_1 = 100$$, $$Q_2 = 80$$
- $$P_1 = 10$$, $$P_2 = 12P$$
- $$E_d = (-0.2 / 0.2) = -1 → Unit elastic$$
Use Cases:
- Businesses adjusting pricing models
- Governments modeling tax impact
- Students and researchers analyzing market behavior