Price Elasticity of Demand Calculator
Compare midpoint price elasticity and revenue across two observations, with clear assumptions and limits.
Earlier editorial review
- Reviewed
- 2026-09-18
- Methodology
- 1.1
Sources
How it works
Enter the initial and final prices and quantities for the same product. The calculator compares midpoint percentage changes, reports the signed elasticity and its magnitude based classification, then shows revenue at each observation and the difference.
An absolute elasticity above one is classified as elastic, below one as inelastic, and equal to one within a small numerical tolerance as unit elastic. The sign remains visible in the elasticity value. Revenue is price multiplied by quantity and does not include costs.
The midpoint method divides each change by the average of its two endpoint values. This avoids choosing one endpoint as the percentage base, so reversing the observations preserves the elasticity. Percent revenue change is unavailable when initial revenue is zero.
Treat the result as a description of two observations. Changes in promotions, product availability, customer mix, seasonality, or competitors can affect quantity too. The calculation does not isolate causality or forecast another price point.
Step by step
- Enter two comparable price and quantity observations.
- Review midpoint changes, signed elasticity, classification, and revenue at both observations.
- Consider costs and other changes before drawing a pricing conclusion.
Worked example
Price rises from $10 to $12 and quantity falls from 100 to 80 units. The midpoint price change is 18.1818 percent and the midpoint quantity change is negative 22.2222 percent, so elasticity is negative 1.2222.
Revenue changes from $1,000 to $960, a decrease of $40 or 4 percent. Reversing the two observations leaves midpoint elasticity unchanged. The example is checked by a unit test.
When to use this calculator
Use this calculator to describe the price and quantity response across two comparable observations and to see how revenue differs between them.
For decisions about profit, pair the revenue comparison with cost information and stronger evidence about what changed demand.
Common interpretation errors
Do not treat an observed quantity change as caused by price when promotions, availability, seasonality, or other conditions also changed.
Do not use revenue as a substitute for profit. Costs and business constraints are outside this calculation.
Formula and units
ε = midpoint percentage change in quantity ÷ midpoint percentage change in price
Midpoint percentage change = (final − initial) ÷ ((final + initial) ÷ 2) × 100
Revenue = price × quantity
The elasticity ratio is undefined when price does not change. Valid revenue amounts can still be shown. Inputs must be finite, prices positive, quantities nonnegative, and average quantity positive.
Limitations
This calculation compares two observations and does not estimate a full demand curve. It assumes the product and units are comparable. Other influences on quantity are not controlled, revenue excludes costs, and the result is not a forecast or price recommendation.
Key terms
- Price elasticity
- The percentage response in quantity divided by the percentage change in price.
- Midpoint method
- The percentage change calculated using the average of the initial and final values.
- Revenue
- Price multiplied by quantity. It excludes costs and is not the same as profit.
Compare with other analyses
Use this result to describe the observed revenue change, then compare it with a break even analysis that includes costs. Revenue alone does not show whether a price change improved profit.
A controlled pricing test can help separate a price response from other changes. This two observation calculator does not estimate a demand curve or choose an optimal price.
FAQ
What does price elasticity measure?
Price elasticity of demand is the percentage change in quantity divided by the percentage change in price. This calculator uses the midpoint method, also called arc elasticity, for two observations.
How are elastic, inelastic, and unit elastic classified?
The sign records the direction of the measured changes. Classification uses the absolute value: above one is elastic, below one is inelastic, and approximately one is unit elastic. The label describes this interval only.
Which observations should I enter?
Use comparable observations for the same product, quantity unit, market, and time basis. If promotions, availability, seasonality, or competitor prices changed, those factors may also explain the quantity difference.
Why is elasticity unavailable when price is unchanged?
When price is unchanged, percentage price change is zero, so the ratio is undefined. The calculator still reports revenue for both observations if the inputs are valid. It does not replace the undefined elasticity with zero.
Does revenue change show whether profit improved?
Revenue is price multiplied by quantity. It excludes production, delivery, marketing, and other costs, so a revenue increase does not by itself establish a profit increase.
Related tools
A break even calculator adds costs to a revenue question. A gross margin calculator compares revenue with unit costs. These tools answer different questions from a two observation elasticity estimate.