Price Elasticity Calculator
The price elasticity of demand between two prices and quantities by the midpoint method, whether demand is elastic or inelastic, and what the change did to revenue.
Result
Price elasticity of demand: 0.45
Between the two points you enter, assuming nothing but the price changed. Elasticity usually differs along a demand curve.
- What it means
- Inelastic: quantity changes by a smaller percentage than price.
- Change in quantity, midpoint
- 6.9%
- Change in price, midpoint
- -15.38%
- Elasticity with its sign
- -0.4483
- Elasticity from the starting point
- -0.5
- Revenue at the starting price
- $196,000.00
- Revenue at the new price
- $180,000.00
https://calcgallery.com/business-investing/price-elasticity-calculator/
Results are arithmetic estimates based on the assumptions you enter, not accounting, tax, investment or lending advice. Forecasts can be wrong and important decisions should be checked with a qualified adviser. Read the full disclaimer
How to use the Price Elasticity Calculator
- Enter the starting price and the quantity sold at it.
- Enter the new price and the quantity sold at that price.
- Read the elasticity, whether demand is elastic or inelastic between those points, and what happened to revenue.
The formulas
% change in quantity = (Q2 − Q1) ÷ ((Q2 + Q1) ÷ 2)% change in price = (P2 − P1) ÷ ((P2 + P1) ÷ 2)elasticity = |% change in quantity ÷ % change in price|Reading the number
An elasticity of 0.45 means quantity changed by 0.45% for each 1% change in price: buyers barely responded. An elasticity of 1.94 means they responded almost twice as strongly as the price moved. Necessities with no close substitute tend to sit at the low end, and products with many alternatives at the high end, but your own data is the only figure that applies to you.
What the diagram shows
Revenue at the starting price beside revenue at the new price. Which bar is taller depends on whether demand was elastic or inelastic over the change.
With your numbers
- Change in quantity = (3,000 − 2,800) ÷ 2,900 = 6.9%
- Change in price = ($60.00 − $70.00) ÷ $65.00 = -15.38%
- Elasticity = |6.9% ÷ -15.38%| = 0.45
Quick reference
Between the two points you enter, assuming nothing but the price changed. Elasticity usually differs along a demand curve.
| Example | Price elasticity of demand |
|---|---|
| 70 to 60, 2,800 to 3,000 | 0.45 |
| 60 to 70, 3,000 to 2,800 | 0.45 |
| 10 to 12, 1,000 to 700 | 1.94 |
| 10 to 20, 200 to 100 | 1 |
| 4.00 to 4.40, 500 to 490 | 0.21 |
| Price unchanged |
Common questions about the Price Elasticity Calculator
- Why use the midpoint method?
- Because a percentage change depends on where you start. Going from 60 to 70 is a 16.7% rise, but from 70 to 60 a 14.3% fall, so the simple method gives a different elasticity depending on direction: 0.40 one way and 0.50 the other in the textbook example. The midpoint method divides by the average of the two values, so both directions give 0.45.
- Why is the elasticity positive when quantity fell as price rose?
- Price elasticity of demand is almost always negative, because people buy less when the price rises. Economists usually drop the sign and report the size, and so does this page. The signed value is shown underneath.
- What does elastic or inelastic mean for revenue?
- With inelastic demand, below 1, quantity changes by a smaller percentage than price, so a price rise increases revenue. With elastic demand, above 1, a price rise loses more in volume than it gains in price, and revenue falls. At exactly 1 revenue is unchanged.
- Can I use this to set my price?
- Carefully. The two points are real only if nothing else changed between them: season, competitors, promotions, stock. Elasticity also changes along the demand curve, so it describes the move you measured, not every possible price.