Business Finance Calculators
Price Elasticity of Demand Calculator
Calculate price elasticity of demand with the midpoint method and see how a price change affects revenue and profit.
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The tool
Enter your numbers below. Results update as you type, and nothing leaves your browser.
Everything you enter stays on your own machine. Nothing is sent to us or to anyone else, which you can confirm in your browser network tab.
What people use it for
- Analysing a price test
- Forecasting the effect of a price increase
- Economics coursework
- Choosing discount levels
About this tool
What the Price Elasticity of Demand Calculator does
Price elasticity of demand compares the percentage change in quantity sold with the percentage change in price. The midpoint (arc) method gives the same answer whichever direction the price moves. Demand is elastic when the result is beyond −1, meaning revenue falls when price rises.
It also works as a price elasticity calculator.
Formula
- % change in quantity = (Q2 − Q1) ÷ average quantity
- % change in price = (P2 − P1) ÷ average price
- Elasticity = % change in quantity ÷ % change in price
Worked example
Using the starting values in the calculator above:
| Input | Value |
|---|---|
| Original price | $20.00 |
| New price | $22.00 |
| Original quantity | 1,000 |
| New quantity | 900 |
| Variable cost per unit (optional) | $8.00 |
| Result | Value |
|---|---|
| Price elasticity of demand | -1.11 |
| Demand is | Elastic |
| Revenue change | -1.0% |
| Profit change | $600 |
How to read the result
Even when demand is elastic and revenue falls, profit can rise after a price increase if variable costs are high, because you sell fewer units at a better margin. The profit line shows this.
Elasticity measured from one test applies around that price only. Test again before making a large move.
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Questions
Questions about this tool
The things clients actually want to know — costs, timelines, ownership and what happens after launch.
A 1% price increase reduces quantity demanded by about 1.1%, so demand is slightly elastic and revenue falls when price rises.
It calculates percentage changes using the average of the start and end values, so the result is the same whether price rises or falls.
Few substitutes, necessity, brand loyalty and the purchase being a small share of the buyer's budget.
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