Price Elasticity of Demand Calculator
How sensitive your customers are to price, measured from a real price change, and whether raising or cutting price would grow revenue.
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- Runs in your browser, nothing is stored
- Formula and worked example included
Price Elasticity of Demand Calculator
Enter your figures to see results.
Will raising or cutting my price increase revenue?
Price elasticity tells you how sensitive your customers are to price. If a 10% price rise loses you 5% of sales, demand is inelastic and the rise makes you more money; if it loses 20%, demand is elastic and you are better off holding or cutting. Enter a real price change and the sales before and after to find out which side you are on.
How to use this calculator
- Enter the price and units sold over a period before the change.
- Enter the new price and units sold over a comparable period after it: same length, same season, nothing else changed.
- Read the elasticity, whether demand is elastic or inelastic, and the effect on revenue.
What your result means
How to read the figure, what counts as normal, and what to do about it.
What elasticity tells you about pricing
Price elasticity of demand measures how much the quantity you sell changes when the price changes. If a 10% price rise loses you 5% of sales, demand is inelastic (elasticity −0.5) and the rise increases revenue. If it loses you 20%, demand is elastic (−2.0) and revenue falls. Knowing which side of −1 you sit on is the single most useful fact in a pricing decision.
Elasticity is a property of your product, your customers and your competitors, not a universal constant. Necessities, products with no close substitute and small-ticket items tend to be inelastic; discretionary purchases with many alternatives are elastic. It also changes with the size of the move and with time: customers who tolerate a 5% rise may not tolerate 25%, and they find substitutes eventually.
Reading the result
| Elasticity | Type | To increase revenue |
|---|---|---|
| 0 to −1 | Inelastic | Raise price |
| Exactly −1 | Unit elastic | Revenue unchanged by small moves |
| Below −1 | Elastic | Lower price (if margin allows) |
| Positive | Unusual | Check for other factors that changed |
Revenue is not profit. Cutting price on an elastic product raises revenue but each extra unit costs money to supply; use the discount calculator to check the volume you need for profit, not just sales.
Getting a clean measurement
- Compare like with like: the same length of period, the same season, no promotion running in one but not the other.
- Change one thing. If the price rose and a competitor closed in the same month, the elasticity you measure is meaningless.
- Test on a subset if you can (one region, one channel, or an A/B test online) before rolling a price change out.
- Larger changes give clearer signals but greater risk. A 5–10% test is usually enough to read.
Worked example: a café raising the price of lunch
A café sold 500 lunch deals a week at £20. It raised the price to £24 and, after four weeks of settling, sells 420 a week.
Change in quantity = (420 − 500) ÷ 460 = −17.4%. Change in price = (24 − 20) ÷ 22 = +18.2%.
Elasticity = −17.4 ÷ 18.2 = −0.96: almost exactly unit elastic. Weekly revenue moved from £10,000 to £10,080, nearly unchanged, but the café serves 80 fewer lunches, so food and labour costs fall. Profit rose even though revenue barely moved.
Frequently asked questions
Why is elasticity negative?
Because quantity normally moves in the opposite direction to price. Economists often quote the absolute value ("elasticity of 1.5") and the sign is understood. A positive result means demand rose with price, which usually signals that something else changed.
What is a typical elasticity?
Petrol, utilities and tobacco are around −0.2 to −0.5 in the short run. Restaurant meals, branded groceries and consumer electronics are commonly −1 to −2.5. Products with a direct, identical substitute can be −5 or more.
Should I raise prices if demand is inelastic?
Revenue and usually profit will rise, so yes: in steps, watching the response, and mindful that elasticity increases with the size of the rise and over time as customers adjust.
Can I calculate elasticity without changing my price?
Not precisely. You can estimate it from competitor comparisons, customer surveys (Van Westendorp or conjoint analysis) or from natural variations such as regional price differences, but a controlled test is far more reliable.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The formula
Midpoint (arc) method: % change in quantity = (Q₂ − Q₁) ÷ ((Q₁ + Q₂) ÷ 2) % change in price = (P₂ − P₁) ÷ ((P₁ + P₂) ÷ 2) Elasticity = % change in quantity ÷ % change in price
The midpoint method divides by the average of the two values, so the answer is the same whether you move from A to B or B to A. The simple method (dividing by the starting value) gives a different answer in each direction and is best avoided.
Assumptions and limits
- Nothing other than price changed between the two periods. Seasonality, marketing, competitor moves and stock availability all contaminate the measurement.
- Elasticity is measured between the two specific prices entered. It may be very different for larger moves or at other price points.
- Quantities are for the same length of period, or already normalised per week or per month.
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