If demand is elastic, cutting the price raises total revenue; if inelastic, raising the price raises total revenue. Necessities and goods without substitutes (fuel, medicine) tend to be inelastic.
How to use the Price Elasticity of Demand Calculator
- Initial price
- New price
- Initial quantity
- New quantity
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the initial and new price and the initial and new quantity demanded.
Tips
- Use consistent periods (a year or a quarter) for flow figures and period-end values for balances.
- Average opening and closing balances when a ratio mixes a flow with a stock.
- Benchmark against competitors in the same industry.
- Read the ratio together with others – profitability, liquidity and efficiency tell different stories.
Common mistakes to avoid
- Using sales instead of cost of goods sold for inventory ratios.
- Mixing gross, operating and net profit.
- Ignoring one-off items that distort a single year.
Inputs explained
| Field | What to enter |
|---|---|
| Initial price | Amount in your currency |
| New price | Amount in your currency |
| Initial quantity | A number |
| New quantity | A number |
What each result means
- Percentage change in quantity (midpoint) = ([New quantity] – [Initial quantity])÷(([New quantity] + [Initial quantity])÷2)×100
- Percentage change in price/income (midpoint) = ([New price] – [Initial price])÷(([New price] + [Initial price])÷2)×100
- Price elasticity of demand = [Percentage change in quantity (midpoint)]÷[Percentage change in price÷income (midpoint)]
- Initial total revenue = [Initial price]×[Initial quantity]
- New total revenue = [New price]×[New quantity]
Example values
How the main result changes when Initial price changes and everything else stays at the example values above:
| Initial price | Price elasticity of demand |
|---|---|
| 5 | -0.27 |
| 7.5 | -0.481 |
| 10 | -1.222 |
| 12.5 | 5.444 |
| 15 | 1 |
| 20 | 0.444 |
Formula
Elasticity = % change in quantity ÷ % change in priceMidpoint % change = (new − old) ÷ ((new + old) ÷ 2) × 100|e| > 1 elastic, |e| < 1 inelastic, |e| = 1 unit elasticWorked example
Inputs — Initial price: $10; New price: $12; Initial quantity: 1,000; New quantity: 800.
Results — Percentage change in quantity (midpoint) = -22.22 %; Percentage change in price/income (midpoint) = 18.18 %; Price elasticity of demand = -1.222; Demand is = Elastic; Initial total revenue = $10,000.00; New total revenue = $9,600.00.
Frequently asked questions
What is price elasticity of demand?
The responsiveness of quantity demanded to a price change.
What does an elasticity of −2 mean?
A 1% price increase cuts quantity demanded by about 2%.
Why use the midpoint method?
It gives the same answer for price increases and decreases.
What formula does the Price Elasticity of Demand Calculator use?
Elasticity = % change in quantity ÷ % change in price.