Price Elasticity Calculator
A price that rises 18% while quantity demanded falls 22% has a price elasticity of -1.22, which is elastic. This calculator uses the midpoint (arc elasticity) method to turn an old price, new price, old quantity, and new quantity into a single elasticity coefficient, then classifies demand as elastic, inelastic, unit elastic, or perfectly inelastic.
Quick answer
Price elasticity of demand measures how much quantity demanded changes when price changes.
What this tells you
- •Price elasticity of demand measures how much quantity demanded changes when price changes.
- •The midpoint method uses the average of the old and new values as the base, so it gives the same result whether price moves up or down between two points.
- •An elasticity below -1 or above 1 in absolute value means demand is elastic, and buyers are sensitive to the price change.
- •An elasticity between -1 and 1 in absolute value means demand is inelastic, and quantity barely responds to price.
How to Use
- 1Enter the old price and the new price for the product.
- 2Enter the old quantity demanded and the new quantity demanded at those two prices.
- 3Calculate to see the percentage change in quantity, the percentage change in price, and the elasticity coefficient.
- 4Read the classification label to see whether demand is elastic, inelastic, unit elastic, or perfectly inelastic.
How It Works
Formula
%ΔQuantity = (New Qty - Old Qty) / ((Old Qty + New Qty) / 2) x 100
%ΔPrice = (New Price - Old Price) / ((Old Price + New Price) / 2) x 100
Elasticity = %ΔQuantity / %ΔPriceThe midpoint method divides each change by the average of the old and new values instead of just the old value. That keeps the percentage change consistent regardless of which point you treat as the starting point, so the elasticity result does not flip depending on whether price went up or down between the same two prices.
Calculation note: values are processed in the order shown above, using the current input units.
Worked Examples
Elastic demand
Price rose 18.18% and quantity fell 22.22%. Dividing the quantity change by the price change gives -1.22. Since the absolute value is above 1, demand is elastic, meaning buyers cut back more than proportionally when price rises.
Inelastic demand
Price rose 9.52% but quantity only fell 5.13%. The elasticity of -0.54 has an absolute value below 1, so demand is inelastic, meaning buyers keep purchasing close to the same amount despite the price increase.
How to read a price elasticity result
Compare the absolute value of the elasticity coefficient against these ranges.
| Absolute elasticity | Classification | What it means |
|---|---|---|
| Equal to 0 | Perfectly inelastic | Quantity demanded does not change at all when price changes |
| Between 0 and 1 | Inelastic | Quantity changes less than proportionally to the price change |
| Equal to 1 | Unit elastic | Quantity changes by exactly the same percentage as price |
| Greater than 1 | Elastic | Quantity changes more than proportionally to the price change |
The sign of the elasticity coefficient is usually negative for demand, since price and quantity demanded typically move in opposite directions. Classification is based on the absolute value.
Why the elasticity sign is usually negative
Demand curves normally slope downward, so when price goes up, quantity demanded goes down, and when price falls, quantity demanded rises. That inverse relationship is why the elasticity coefficient this calculator returns is usually negative for ordinary goods.
Economists commonly discuss the size of elasticity using its absolute value, since the sign just confirms the expected direction. A coefficient of -1.22 and 1.22 both describe elastic demand, but the negative sign is the normal case for a standard downward-sloping demand curve.
Common mistakes
- Reading the elasticity sign as the classification instead of using its absolute value
- Using the simple percentage method (dividing by the old value only) and getting a different result depending on the direction of the price change
- Comparing elasticity across two different products or time periods without a matching price and quantity pair
- Assuming a small change in price always causes a small change in revenue, without checking whether demand is elastic or inelastic