What is the difference between relative and absolute cell references?

Relative references are a fundamental concept in Excel that enhance the flexibility of formulas. When you use relative references in a formula, the references adjust automatically when the formula is copied or moved to another cell. For example, if a formula contains a reference to cell A1 and is copied from cell B1 to cell B2, the reference changes from A1 to A2. This behavior makes relative references particularly useful when applying the same formula to multiple rows or columns of data, where the formula needs to adjust based on its position.

On the other hand, absolute references, which are denoted with a dollar sign (e.g., $A$1), remain constant regardless of where they are copied. This means that when a formula containing an absolute reference is copied, the reference does not change. This is essential when you want to refer back to a specific cell or value that should not shift, such as a tax rate or a fixed threshold.

Understanding this difference allows users to create dynamic formulas that can efficiently calculate results across a range of data without the hassle of manually adjusting cell references. This functionality is a key aspect of efficient spreadsheet management. The other choices presented do not accurately define the primary characteristics of relative and absolute references as understood in Excel.