How do you calculate price elasticity of demand?

This calculator uses the midpoint (arc elasticity) method: Elasticity = (% Change in Quantity) ÷ (% Change in Price), where each percentage change is measured against the average of the old and new values, not just the starting value. This gives a consistent result whether the price goes up or down between the same two points.

What does an elasticity of -1.5 actually mean?

The magnitude, 1.5, is what matters for classification — since demand curves normally slope downward, elasticity is negative for ordinary goods, and an absolute value above 1 means demand is elastic: quantity falls proportionally more than price rises, so a price increase reduces total revenue.

Why does elasticity matter for pricing decisions?

If demand is elastic, raising price loses more in volume than it gains per unit, so total revenue falls — a discount is more likely to grow revenue instead. If demand is inelastic, the opposite holds: a price increase usually grows revenue because customers keep buying nearly the same quantity regardless.

Price Elasticity Calculator

(Demand & Revenue Impact Tool)

Calculate price elasticity of demand from two price and quantity points using the midpoint method, and see what a price change does to total revenue.

Step 1 — Price Points

Original Price ($)

New Price ($)

Step 2 — Quantity Demanded at Each Price

Original Quantity Sold

New Quantity Sold

Calculated Results

Enter two different price points and their corresponding quantities sold to calculate elasticity.

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The Midpoint Method Fixes an Old Elasticity Problem

The simple version of elasticity — percent change over the starting value — gives a different answer depending on whether you calculate a price increase or its exact reverse decrease, which makes no economic sense for the same two points. The midpoint (arc elasticity) method fixes this by measuring both percentage changes against the average of the two values, which is the version taught in most economics courses for exactly this reason.

Elasticity = [ΔQ ÷ ((Q₁+Q₂)/2)] ÷ [ΔP ÷ ((P₁+P₂)/2)]

Reading the Result

\|Elasticity\|	Classification	Effect of a Price Increase
Greater than 1	Elastic	Total revenue falls
Exactly 1	Unit Elastic	Total revenue roughly unchanged
Less than 1	Inelastic	Total revenue rises

Frequently Asked Questions (FAQ)

Simple percentage change gives a different elasticity depending on which price you treat as the "starting" one, even for the exact same two points. The midpoint method removes that inconsistency by averaging both endpoints.

It tells you whether a price change grows or shrinks total revenue. Elastic demand means a discount is more likely to grow revenue; inelastic demand means a price increase usually does.