# Price Elasticity of Demand Calculator

Calculate price elasticity of demand using the midpoint method. Determine if demand is elastic or inelastic and understand revenue impact. Free calculator.

## What this calculates

Measure how sensitive consumer demand is to price changes with our price elasticity calculator. Enter original and new prices and quantities to calculate the elasticity coefficient using the midpoint method, and see the impact on revenue.

## Inputs

- **Original Price** ($) — min 0.01 — The initial price of the product.
- **New Price** ($) — min 0.01 — The new price after the change.
- **Original Quantity Demanded** — min 0 — The quantity demanded at the original price.
- **New Quantity Demanded** — min 0 — The quantity demanded at the new price.

## Outputs

- **Price Elasticity of Demand** — The elasticity coefficient (absolute value). Values >1 are elastic, <1 are inelastic.
- **Elasticity Type** — formatted as text — Whether demand is elastic, inelastic, or unit elastic.
- **Revenue Impact** — formatted as text — How the price change affects total revenue based on elasticity.

## Details

Price Elasticity of Demand (PED) measures how much the quantity demanded of a good changes when its price changes. This calculator uses the midpoint (arc elasticity) method: PED = (%Change in Quantity) / (%Change in Price), where percentage changes are calculated using the average of the two values as the base. This method gives the same result regardless of the direction of the price change.

When the absolute value of PED is greater than 1, demand is elastic: consumers are highly responsive to price changes, and a price increase will reduce total revenue. When PED is less than 1, demand is inelastic: consumers are less responsive, and a price increase will increase total revenue. At exactly 1 (unit elastic), total revenue remains unchanged.

Understanding elasticity is crucial for pricing strategy. Luxury goods, products with many substitutes, and non-essential items tend to have elastic demand. Necessities, addictive products, and items with few substitutes tend to have inelastic demand. Businesses can maximize revenue by raising prices on inelastic products and lowering prices on elastic products to gain volume.

## Frequently Asked Questions

**Q: What is price elasticity of demand?**

A: Price elasticity of demand measures how sensitive consumer demand is to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A value greater than 1 (elastic) means demand is very responsive to price changes, while a value less than 1 (inelastic) means it is not.

**Q: Why use the midpoint method?**

A: The midpoint (arc elasticity) method uses the average of the two prices and quantities as the base for calculating percentage changes. This avoids the problem where calculating elasticity from A to B gives a different result than from B to A. The formula is: PED = ((Q2-Q1)/((Q2+Q1)/2)) / ((P2-P1)/((P2+P1)/2)).

**Q: How does elasticity affect pricing decisions?**

A: If demand is elastic (PED > 1), lowering prices increases total revenue because the increase in quantity sold more than compensates for the lower price. If demand is inelastic (PED < 1), raising prices increases revenue because the quantity decrease is small relative to the price increase. Optimal pricing depends on finding the point where marginal revenue equals marginal cost.

---

Source: https://vastcalc.com/calculators/finance/price-elasticity
Category: Finance
Last updated: 2026-04-21