📊 Price Elasticity of Demand Calculator
Calculate price elasticity of demand
How to Use This Calculator
Enter Initial and New Quantity
Provide the initial quantity demanded and the new quantity after the price change.
Enter Initial and New Price
Enter the initial price and the new price that led to the quantity change.
Review Price Elasticity
See how sensitive demand is to price changes. Elastic means sensitive; inelastic means relatively insensitive.
Formula
Price Elasticity = (% Change in Quantity) / (% Change in Price)
Example Calculation:
If initial quantity = 100, new quantity = 80, initial price = $50, new price = $60:
• % change in quantity = (80 − 100) / 100 = −20%
• % change in price = (60 − 50) / 50 = +20%
• Price elasticity = −20% / 20% = −1.0
• This indicates unit elastic demand
About Price Elasticity of Demand Calculator
Use this tool to estimate how sensitive the quantity demanded of a product is to price changes. The results help classify demand as elastic, inelastic, or unit elastic and inform pricing, revenue optimization, and market strategy decisions.
When to Use This Calculator
- Pricing Decisions: Gauge how customers might react to price changes.
- Revenue Optimization: Explore pricing that maximizes revenue.
- Market Analysis: Understand consumer responsiveness to price.
- Business Planning: Support strategic pricing initiatives.
Understanding Price Elasticity
- Elastic (|E| > 1): Demand is sensitive to price; higher prices shrink revenue.
- Inelastic (|E| < 1): Demand is less sensitive; higher prices can raise revenue.
- Unit Elastic (|E| = 1): Proportional response; price changes leave revenue unchanged.
- Negative Sign: Indicates the usual inverse relationship between price and quantity.
Why Use Our Calculator?
- ✅ Pricing Decisions: Quickly compute elasticity.
- ✅ Revenue Optimization: Identify profitable price points.
- ✅ Market Analysis: Support demand forecasting.
- ✅ Business Planning: Inform long-term strategy.
- ✅ 100% Free: No registration or payment required.
Frequently Asked Questions
What is price elasticity of demand?
Price elasticity of demand measures how much quantity demanded responds to price changes. It is calculated as the percentage change in quantity divided by the percentage change in price.
What does elastic vs. inelastic mean?
Elastic demand (|E| > 1) means quantity reacts strongly to price changes. Inelastic demand (|E| < 1) means quantity reacts only slightly. Unit elastic (|E| = 1) indicates proportional response.
What factors affect price elasticity?
Substitutes, necessity vs. luxury, time horizon, income share, brand loyalty, and product addictiveness all influence elasticity.
How do I use elasticity for pricing?
If demand is elastic, lower prices can increase revenue. If demand is inelastic, modest price increases may raise revenue. Knowing elasticity helps tailor pricing strategies to meet business goals.