Introduction Cross Price Elasticity Calculator
We introduce a cross price elasticity calculator. It helps you to determine the relationship between two products. It provides the result according to the price and demand of the product.
It gives negative, positive, and zero elasticity results. The elasticity depends on increasing or decreasing the price and the demand of the product.
Why use online cross-price elasticity of demand calculator
The online tool provides accurate results when you insert the values as input. The formula and manual calculation are very tricky and difficult. The calculation by hand enhances the chance of miss calculations.
That is why you should use the price elasticity online tool. It has a built-in formula; when you insert the values, it executes them within seconds. The important thing is that it is a free-of-cost tool for a lifetime. You can use it anytime from “calculatores.”
How to use the price elasticity of the supply calculator?
The use of the calculator is simple. Before calculating elasticity, you must have values like (product initial and final price, how much change the price, product initial and final demand, and how much change the demand). Then follow the steps given below
- Open the cross-price elasticity tool.
- Insert the values into the boxes.
- You can use the example values for understanding.
- Now click on the calculate button.
- After clicking the button, it executes the input.
- The result will show on the screen.
If you want to recalculate the elasticity, click the button (calculate again), which will load the calculator.
Understanding the price elasticity of the demand formula
The formula is very easy to understand.
The formula is
$$ elasticity = \frac{(price_1 A + price_2 A)}{(quantity_1 B + quantity_2 B)}\; \times \; \frac{(∆ Quantity B)}{(∆ Price A)} $$
Where,
Price₁ A = initial price of product A.
Price₂ A = final price of product A.
Δ Price A = change in the price of product A.
Quantity₁ B = initial demand for product B.
Quantity₂ B = final demand for product B.
Quantity B = change in demand for product B.
Example
The coke price is 3$. And Pepsi sold 5k units in a week. The coke company decreases the price by 2$. Pepsi sold 4k units. Calculate the elasticity.
$$ elasticity = \frac{(price_1 A + price_2 A)}{(quantity_1 B + quantity_2 B)}\; \times \; \frac{(∆ Quantity B)}{(∆ Price A)} $$
elasticity = 3+2 / 5+4 X ∆4-5 / ∆2-3
elasticity = 5 /9 X -1 / -1
elasticity = 0.556 X 1.000
elasticity = 0.56
Negative cross-price elasticity
When A product price increases, and the demand for the b product decreases.it means you got negative elasticity.
Positive elasticity
If the elasticity is positive, that means the A product price increases and the B product demand also increases.
Zero elasticity
The zero elasticity shows no supply and demand relation between both products.
Benefits of the cross-price elasticity of demand calculator
The tool is very beneficial for people. There are a few benefits given below
- The user interface is very simple; you can easily understand the calculator.
- The tool helps you to calculate 100% accurate output.
- It saves your time and energy by providing you with auto results.
- It is a free of cost tool and saves you Money from premium calculators.
- It can be used as a professional tool.
FAQs
Is it a reliable tool for calculating elasticity?
Yes, it is a reliable tool for calculation. You can trust its results.
Why do we calculate elasticity?
The elasticity shows the supply and demand of two relevant things. That is why we calculate the elasticity.
What is a cross-price elasticity example?
Suppose you have a factory where you produce coffee machines and coffee powder. You decrease the price of the coffee machine. The sell ratio of the machine increased, as also the coffee powder. The concept is that a product price affects the demand for the b product.
