Price Elasticity of Demand Calculator
Measure how sensitive demand is to price using the midpoint method — elasticity, whether demand is elastic, and the revenue implication.
How it works
Elasticity = (%Δ quantity) ÷ (%Δ price), using the midpoint method: %Δ = (new − old) ÷ average
Price elasticity of demand measures how much the quantity sold responds to a price change. The midpoint (arc) method divides each change by the average of the two values, so you get the same elasticity whether the price rose or fell. An absolute value above 1 means demand is elastic — a price rise cuts revenue — while below 1 means demand is inelastic and a price rise lifts revenue.
Worked example
Raising price from $10 to $12 drops quantity from 100 to 80. Using averages of 90 units and $11: %Δq = −20 ÷ 90 = −22.2%, %Δp = 2 ÷ 11 = 18.2%, so elasticity = −1.22. Demand is elastic, and revenue falls from $1,000 to $960.
Frequently asked questions
Why use the midpoint method?
Ordinary percentage change gives a different answer depending on which point you start from. Dividing by the average of the old and new values makes the elasticity symmetric, so a rise from $10 to $12 and a fall from $12 to $10 give the same magnitude.
What does elastic vs inelastic mean for pricing?
If demand is elastic (|E| > 1), raising prices reduces total revenue because volume drops faster than price rises. If it is inelastic (|E| < 1), a price increase raises revenue. Necessities tend to be inelastic; discretionary goods with close substitutes tend to be elastic.
Why is elasticity usually negative?
Because price and quantity move in opposite directions — raising price lowers demand. Economists often quote the absolute value, so an elasticity of −1.2 is described simply as "1.2, elastic".
Related calculators
Educational estimate, not financial advice.