Free tool
Price Elasticity Of Demand Calculator
Price elasticity tells you how much your sales move when your price moves. Above 1, demand is elastic: a price increase loses more revenue through lost sales than it gains on each sale.
Price elasticity of demand is the percentage change in quantity sold divided by the percentage change in price. The midpoint method calculates each change on the average of the two values, which gives the same elasticity whether the price goes up or down. Above 1 in absolute value, demand is elastic; below it, demand is inelastic.
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How price elasticity is calculated
% sales = (Q2 − Q1) ÷ ((Q1 + Q2) ÷ 2) × 100 % price = (P2 − P1) ÷ ((P1 + P2) ÷ 2) × 100 Elasticity = |% sales ÷ % price|
This is the example from the OpenStax economics textbook: a price going from 60 to 70 € brings sales down from 3,000 to 2,800. Sales drop 6.9 %, the price rises 15.4 %: elasticity is 0.45. Demand is inelastic, and revenue rises 8.9 %.
For the calculation to mean anything, the two periods must be alike: same length, same season, same advertising effort. Otherwise the gap in sales measures something other than price. The price increase calculator starts from your margin to tell you how many sales you can lose.
What the calculation helps you decide
- A price increase: with inelastic demand, revenue rises despite the lost sales.
- A promotion: with elastic demand, a lower price can win enough sales to raise revenue. The discount calculator then checks what is left of your margin.
Frequently asked questions
How do I calculate price elasticity of demand?
Divide the percentage change in sales by the percentage change in price. With the midpoint method: 6.9 % ÷ 15.4 % = 0.45.
What is elastic demand?
Demand whose elasticity is above 1 in absolute value: sales move more than price. A price increase then lowers revenue.
Why use the midpoint method?
Because it gives the same elasticity between two prices whether the price goes up or down: each change is calculated on the average of the two values.
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