### How to Use Price Elasticity of demand Calculator

# Price Elasticity of demand Calculator

### How to find the Price elasticity of demand

A real world example :

A company is selling earphones, currently the company sells each earphone for $15. With this price the company sells 3,000 a month. The company then decides to change the price to $12 for each earphone. Company then sold 5,000 earphones a month. Now we have our starting price and our price change along with earphones sold for each price, with this information we can calculate the price elasticity of demand.

- We then fill in the formula with our values
- First we want to get the percentage change in quantity demand for a product. The top will look like this

(5,000-3,000)/(5,000+3,000)

this will give us the percentage change. In this case there was a 25 (rounded) percent change in the quantity demand after the price change - Then we will do the bottom of our formula, the price change
- Again we put in our old values to the right and new to the left so our bottom line will look like this:

(12-15)/(12+15) this will give us the price change percentage, which is -11 percent! - Finally we divide the top by the bottom
- 25/-11 = -2.25, our Elasticity is Elastic

Price Elasticity of demand is used in economics to measure the effect a price change has on a products demand. It is often used while discussing price sensitivity.

### Three types of Elasticity

- Inelastic demand
- Inelastic demand is if the price change is more then the quantity demand change.

- Elastic demand
- Is when the price change percentage is smaller than the quantity demand change.

- Unitary
- When the change in price of a product is equal to the change in quantity demanded.

### Analyzing Price Elasticity

Now we can do the calculations and discover the elasticity. The formula for the price elasticity of demand is:

**The percentage of change in quantity demand for a product / percent change in price **

**[(FQ -IQ)/(FQ+ IQ)]/[(FP-IP)/(FP+IP)]**

- FQ = Demand after the price change
- IQ = Demand before price change
- PF = Final Price
- IP = Initial Price

- If the result is = 1 then the elasticity is Unitary.
- If the result is > 1 then the elasticity is Elastic
- If the result is < 1 then the elasticity is inelastic