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Price Elasticity of Demand Calculator
Price elasticity of demand measures how much the quantity sold changes when the price changes. Enter the old and new price and the quantity sold at each. The calculator uses the midpoint method, so you get the same answer whichever direction the price moved, and it shows what happened to revenue.
- Demand is
- Inelastic
- Change in quantity (midpoint)
- -16.22%
- Change in price (midpoint)
- 18.18%
- Change in revenue
- $200.00
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Formula
How to use it
- Enter the price and the quantity sold before the change.
- Enter the price and the quantity sold after it, over an equal period.
- Read the elasticity and whether demand is elastic or inelastic.
- Check the change in revenue to see whether the price move paid off.
Worked examples
Raising a price from $10 to $12 and seeing sales fall from 1,000 to 850
- Change in quantity (midpoint)
- -16.22%
- Change in price (midpoint)
- 18.18%
- Price elasticity of demand
- -0.89
- Demand is
- Inelastic
- Change in revenue
- $200.00
Cutting a price from $20 to $18 and seeing sales rise from 500 to 600
- Change in quantity (midpoint)
- 18.18%
- Change in price (midpoint)
- -10.53%
- Price elasticity of demand
- -1.73
- Demand is
- Elastic
- Change in revenue
- $800.00
Reading the result
Elasticity is normally negative, because price and quantity move in opposite directions; what matters is its size. Larger than 1 (ignoring the sign) is elastic: buyers react strongly, and a price rise lowers revenue. Smaller than 1 is inelastic: buyers react weakly, and a price rise increases revenue. Exactly 1 is unit elastic, where revenue does not change.
Necessities with few substitutes — fuel, utilities, staple foods — tend to be inelastic. Products with close competitors or that are easy to postpone tend to be elastic.
Why the midpoint method
Measured from the starting point, a move from $10 to $12 is a 20% rise, but the move back from $12 to $10 is a 16.7% fall, so the simple formula gives two different elasticities for the same pair of points. The midpoint (arc) method divides each change by the average of the two values, giving one answer.
Revenue is not profit. A price rise that trims revenue slightly can still raise profit, because you also make and ship fewer units. And elasticity measured from two data points assumes nothing else changed — season, advertising and competitors’ prices all affect sales too.
Questions people ask
What does an elasticity of −0.89 mean?
Demand is inelastic: a 1% price increase reduces quantity sold by about 0.89%. Since quantity falls by less than price rises, revenue goes up.
Is demand elastic or inelastic if elasticity is −1.73?
Elastic. Quantity changes by 1.73% for each 1% change in price, so cutting the price raises revenue and raising it lowers revenue.
Why is price elasticity negative?
Because when price goes up, quantity demanded usually goes down, so one percentage change is positive and the other negative. Many textbooks drop the minus sign and quote the absolute value.