## Calculating Elasticity and Percentage Changes

Read this article on how to estimate elasticity. Make sure to answer the "Try It" questions.

### Calculating Elasticity

The formula for calculating elasticity is:

Let's look at the practical example mentioned earlier about cigarettes. Certain groups of cigarette smokers, such as teenage, minority, low-income, and casual smokers, are somewhat sensitive to changes in price: for every 10 percent increase in the price of a pack of cigarettes, the smoking rates drop about 7 percent. Plugging those numbers into the formula, we get