How to read your result
Your elasticity value classifies into three bands. |PED| above 1 means demand is elastic — quantity moves more than price, so a price increase tends to cut revenue and a discount tends to raise it (check profit too: more units at a lower margin can still shrink profit). |PED| below 1 means demand is inelastic — quantity moves less than price, so a price increase tends to raise revenue, though long-term churn or customer satisfaction is worth watching. |PED| near 1 is unit elastic — revenue stays roughly flat either way, so the decision should turn on profit and customer mix rather than revenue. The sign is usually negative, since price and quantity normally move in opposite directions; business interpretation typically uses the absolute value. Revenue is only half the picture — a discount that lifts revenue can still cut profit once costs are counted, which is what the pricing simulator and scenario modes are for.
Worked example
Price rises from 100 to 110 and units sold fall from 1,000 to 850.
Midpoint PED = (−150 ÷ 925) ÷ (10 ÷ 105) ≈ −1.70 — demand is elastic, since |PED| is above 1.
Revenue before = 100 × 1,000 = 100,000. Revenue after = 110 × 850 = 93,500 — the price increase hurt revenue, exactly what elastic demand predicts. Whether profit also fell depends on the margin gained on each remaining unit; the pricing simulator answers that from your costs.
Limitations
Elasticity uses the midpoint (arc) formula by default, with a simple-percentage option. The simulator projects quantity as current × (1 + elasticity × % price change), capped at zero, then computes revenue and gross profit.
- Elasticity can change at different price ranges; a single value is a local estimate, and moves over 30% are less reliable.
- Past demand does not guarantee future demand; competitors and seasonality matter.
- SaaS churn response differs from one-time-purchase elasticity.
- Profit decisions need cost data, not just revenue.
- This is an educational/planning tool, not financial, tax, or business advice.
Read the guide
There is no dedicated price elasticity guide yet. For the pricing math elasticity interacts with, see Profit Margin vs Markup vs Break-Even: The Difference Explained.