📉 Price Elasticity of Demand Calculator
By ToolNimba Finance Team · Reviewed by ToolNimba Editorial Review, pricing and economics content · Updated 2026-06-19
This calculator gives an estimate based on the two price and quantity points you enter. Real demand is shaped by competitors, seasonality, income, advertising and other factors that a simple two-point elasticity cannot capture. The result is for education and planning only, it is not financial, pricing or business advice. Test price changes carefully and consult a qualified adviser before making major pricing decisions.
Price elasticity of demand (PED) measures how sensitive the quantity people buy is to a change in price. This calculator uses the midpoint (arc) method, which gives the same elasticity whether the price rises or falls between the two points. Enter your old and new price and the old and new quantity sold, and you will instantly see the PED value, the percentage change in quantity and price, and whether demand is elastic, inelastic or unit elastic.
What is the Price Elasticity Calculator?
Price elasticity of demand answers a simple business question: if I change my price, how much will the quantity I sell change? It is defined as the percentage change in quantity demanded divided by the percentage change in price. Because demand normally falls when price rises, the raw number is usually negative, so most people compare its absolute value (the size, ignoring the minus sign) to decide how responsive customers are.
The midpoint method, also called arc elasticity, calculates each percentage change against the average (midpoint) of the start and end values rather than against the starting value. The percentage change in a variable is (new − old) divided by ((new + old) ÷ 2), times 100. The advantage is symmetry: a move from 10 to 12 and a move from 12 back to 10 give the same elasticity, which is not true if you use the simple start-value method. That makes the midpoint method the standard taught in economics courses and a fairer way to summarise a price change.
Once you have the number, you classify it by its absolute value. If it is greater than 1, demand is elastic: quantity changes proportionally more than price, so cutting the price can raise total revenue and raising it can hurt revenue. If it is less than 1, demand is inelastic: quantity barely moves, so a price increase tends to lift revenue. If it equals 1, demand is unit elastic and revenue stays roughly the same. Luxuries, items with many substitutes and big-ticket purchases tend to be elastic, while necessities, addictive goods and products with few alternatives tend to be inelastic.
When to use it
- Estimating whether raising or cutting your product price will increase or decrease total revenue.
- Comparing how price-sensitive two products or customer segments are before a pricing change.
- Answering economics homework or exam questions that require the midpoint (arc) elasticity method.
- Sanity-checking the impact of a planned discount or price rise using real before-and-after sales figures.
How to use the Price Elasticity Calculator
- Enter the old price and the new price of your product.
- Enter the old quantity sold and the new quantity sold at those prices.
- Read the PED value and the classification (elastic, inelastic or unit elastic).
- Check the percentage changes and the worked line below to see exactly how the result was found.
Formula & method
Worked examples
Price rises from $10 to $12 and quantity sold falls from 100 to 80 units.
- % change in quantity = (80 − 100) ÷ ((80 + 100) ÷ 2) × 100 = -20 ÷ 90 × 100 = -22.22%
- % change in price = (12 − 10) ÷ ((12 + 10) ÷ 2) × 100 = 2 ÷ 11 × 100 = 18.18%
- PED = -22.22% ÷ 18.18% = -1.222
- Absolute value |PED| = 1.222, which is greater than 1
Result: PED ≈ -1.222, demand is elastic
Price rises from $5 to $6 and quantity sold falls only slightly from 200 to 190 units.
- % change in quantity = (190 − 200) ÷ ((190 + 200) ÷ 2) × 100 = -10 ÷ 195 × 100 = -5.13%
- % change in price = (6 − 5) ÷ ((6 + 5) ÷ 2) × 100 = 1 ÷ 5.5 × 100 = 18.18%
- PED = -5.13% ÷ 18.18% = -0.282
- Absolute value |PED| = 0.282, which is less than 1
Result: PED ≈ -0.282, demand is inelastic
How to read the price elasticity of demand value (by absolute size)
| Absolute PED | Type | What it means | Effect of a price rise on revenue |
|---|---|---|---|
| Greater than 1 | Elastic | Quantity changes more than price | Total revenue falls |
| Equal to 1 | Unit elastic | Quantity changes in step with price | Total revenue stays about the same |
| Between 0 and 1 | Inelastic | Quantity changes less than price | Total revenue rises |
| Equal to 0 | Perfectly inelastic | Quantity does not change at all | Total revenue rises with price |
Typical elasticity by product type
| Product type | Usual demand | Why |
|---|---|---|
| Luxury goods | Elastic | Buyers can delay or skip the purchase |
| Goods with many substitutes | Elastic | Shoppers switch brands when prices change |
| Everyday necessities | Inelastic | People keep buying regardless of price |
| Goods with few substitutes | Inelastic | Few alternatives to switch to |
Common mistakes to avoid
- Using the start value instead of the midpoint. The simple method divides by the old value, which gives a different answer depending on whether the price went up or down. The midpoint method divides by the average of the two values, so it is symmetric and is the method this calculator uses.
- Forgetting that PED is normally negative. Because quantity usually falls when price rises, PED is typically a negative number. Classify demand by its absolute value (size), so a PED of -1.5 is elastic just like +1.5 would be.
- Mixing up elastic and inelastic. Elastic means demand is very responsive (|PED| greater than 1) and inelastic means it barely responds (|PED| less than 1). A common slip is to assume a large price change automatically means elastic demand, but it is the quantity response relative to the price change that matters.
- Assuming one elasticity holds at every price. Elasticity changes along a demand curve and over time. A two-point estimate describes only the range between the prices you entered, not the whole curve, so do not extrapolate it to very different prices.
Glossary
- Price elasticity of demand (PED)
- A measure of how much the quantity demanded changes when the price changes, equal to the percentage change in quantity divided by the percentage change in price.
- Midpoint (arc) method
- A way of calculating percentage change that divides by the average of the start and end values, giving the same elasticity whether price rises or falls.
- Elastic demand
- Demand where the absolute value of PED is greater than 1, meaning quantity responds more than proportionally to a price change.
- Inelastic demand
- Demand where the absolute value of PED is less than 1, meaning quantity responds less than proportionally to a price change.
- Unit elastic
- Demand where the absolute value of PED equals 1, so the percentage change in quantity matches the percentage change in price.
Frequently asked questions
What is price elasticity of demand?
Price elasticity of demand (PED) measures how sensitive the quantity people buy is to a change in price. It equals the percentage change in quantity demanded divided by the percentage change in price. A larger absolute value means buyers react more strongly to price changes.
What is the formula for price elasticity of demand?
PED = (percentage change in quantity demanded) ÷ (percentage change in price). This calculator uses the midpoint method, where each percentage change is (new − old) ÷ ((new + old) ÷ 2) × 100, so the result is the same whether the price rises or falls.
Why is the midpoint method used?
The midpoint (arc) method divides by the average of the old and new values rather than the starting value. This makes the elasticity symmetric: a price move from 10 to 12 gives the same number as a move from 12 to 10, which the simpler start-value method does not.
How do I know if demand is elastic or inelastic?
Compare the absolute value of the PED to 1. If it is greater than 1, demand is elastic and quantity changes more than price. If it is less than 1, demand is inelastic and quantity barely moves. If it equals 1, demand is unit elastic.
Why is the elasticity result negative?
For most goods, quantity demanded falls as price rises, so the percentage changes have opposite signs and PED comes out negative. Economists usually focus on the absolute value (the size) to judge how responsive demand is, ignoring the minus sign.
How does elasticity affect total revenue?
If demand is elastic, cutting the price tends to raise total revenue and raising it tends to lower revenue. If demand is inelastic, raising the price tends to raise revenue. If demand is unit elastic, revenue stays roughly the same when the price changes.
Sources
- Price Elasticity of Demand , Investopedia
- Price Elasticity of Demand and Price Elasticity of Supply , OpenStax Principles of Economics