Measure how demand changes when price changes — then test whether a price increase or discount is likely to raise revenue, protect profit, and suit your costs.
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Price elasticity of demand measures how much quantity demanded changes when price changes. It is the percentage change in quantity demanded divided by the percentage change in price. A value above 1 means demand is elastic, below 1 means inelastic, and around 1 means unit elastic.
$
$
Elasticity (PED)
-1.7027
midpoint method
Type
Elastic
|PED| = 1.7027
Revenue change
−6.5%
−$6,500.00
Direction
Price ↑ hurt
Price increase hurt revenue
Two demand points
Revenue impact
Before$100,000.00
After$93,500.00
Elasticity gauge
0 · inelastic1 · unit3+ · elastic
Demand appears elastic: quantity changed more than price. Customers are relatively price-sensitive, so a price increase can cut units sharply and a discount can lift them meaningfully — check profit before discounting.
Download the pricing workbook — from your current inputs
A 10-sheet Excel workbook with live formulas. Projections are estimates based on your inputs — not guaranteed outcomes.
Quick answers
What does my PED result number actually mean?
Price elasticity of demand measures how much quantity demanded changes when price changes. It is the percentage change in quantity demanded divided by the percentage change in price. A value above 1 (in absolute terms) means demand is elastic, below 1 means inelastic, and around 1 means unit elastic.
Which formula method should I pick for this result?
Use the midpoint formula: PED = [(Q2−Q1)/((Q1+Q2)/2)] ÷ [(P2−P1)/((P1+P2)/2)]. The midpoint method gives the same elasticity whether price rises or falls between the two points, so it is the recommended approach.
My result shows a minus sign — is that wrong?
No. Price and quantity demanded usually move in opposite directions — when price rises, quantity falls. The sign is negative; business interpretation typically uses the absolute value.
Should I act on this result by raising the price?
It depends on elasticity. If demand is inelastic, raising price tends to raise revenue. If demand is elastic, raising price tends to lower revenue (and a discount can raise it). If unit elastic, revenue stays broadly the same.
What is a price elasticity of demand calculator?
A price elasticity of demand calculator (PED calculator) measures how sensitive demand is to a price change and then helps you decide whether a price increase or discount is likely to help your business. Enter two price/quantity points to get the elasticity and revenue impact, or use the pricing simulator to project quantity, revenue, profit, and break-even from an estimated elasticity.
It is built for two audiences: economics students who need the midpoint formula, classification, and clear interpretation; and business users — ecommerce sellers, retailers, SaaS founders, course and coaching businesses, local services, and pricing managers — who need a practical price-change decision after costs and fees.
The midpoint elasticity formula
Midpoint (arc) PED
[(Q2−Q1)/((Q1+Q2)/2)] ÷ [(P2−P1)/((P1+P2)/2)]
Recommended — same result whether price rises or falls.
Simple PED
(% change in quantity) ÷ (% change in price)
Uses the initial values as the base.
Revenue
Revenue = Price × Quantity
Compare revenue before and after the price change.
Estimated quantity
Q = Current × (1 + elasticity × %ΔP)
Elasticity is usually negative, so a price rise lowers quantity.
Worked example: price rises from 100 to 110 and units fall from 1,000 to 850. Midpoint PED = (−150/925) ÷ (10/105) ≈ −1.70, so demand is elastic. Revenue falls from 100,000 to 93,500 — a price increase hurt revenue here, exactly what elastic demand predicts.
Elastic, inelastic, and unit elastic demand
Elastic demand (|PED| > 1)
Quantity changes more than price. Customers are relatively price-sensitive — a price increase can cut units sharply, and a discount can lift them meaningfully. Check the profit impact before discounting, because more units at a lower margin can still reduce profit.
Inelastic demand (|PED| < 1)
Quantity changes less than price. This can reflect necessity, brand strength, low substitution, or loyal customers. A price increase tends to raise revenue, but watch long-term churn and satisfaction.
Unit elastic demand (|PED| ≈ 1)
Quantity changes in proportion to price, so revenue stays broadly the same after a price move. Profit, conversion, and customer quality should guide the decision.
The revenue rule
If demand is elastic, raising price tends to reduce total revenue; lowering price tends to increase it.
If demand is inelastic, raising price tends to increase total revenue; lowering price tends to reduce it.
If demand is unit elastic, total revenue stays broadly the same after a price move.
Revenue is only half the picture. A discount that lifts revenue can still cut profit once costs are counted, and a price increase that loses some units can still raise profit. That is why the business simulator shows both revenue and profit impact, and why elasticity alone should never set a price.
How businesses use price elasticity
Ecommerce & retail
A discount only helps if the extra units cover the lower margin after marketplace and payment fees, shipping, packaging, and returns. The ecommerce model shows the units a discount needs to break even and the unit loss a price increase can tolerate.
SaaS & subscriptions
Subscription price changes affect MRR, ARR, and churn. The SaaS model projects subscriber count, MRR/ARR, gross profit, and CAC payback — with the caveat that churn response is not the same as one-time-purchase elasticity.
Local services
For salons, tutors, clinics, and agencies, a higher price with fewer bookings can still improve profit, especially near capacity. The local model shows utilisation, profit, and profit per booking before and after.
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. The engine and the Excel workbook formulas are validated against hand-computed cases and an Excel-compatible formula engine on every change. Updated 14 June 2026 · Calculator Matters.
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.
Worked examples
Elastic product, price increase
Price 100 → 110, units 1,000 → 850. Midpoint PED ≈ −1.70 (elastic). Revenue 100,000 → 93,500. The increase hurt revenue, but at a 45 variable cost and 10,000 fixed cost, profit edges up from 45,000 to 45,250 — a profit-positive, volume-negative move.
Inelastic service, price increase
Price 100 → 120, units 1,000 → 950 gives PED ≈ −0.25 (inelastic). Revenue rises from 100,000 to 114,000, so a price increase raises revenue when demand is inelastic.
All examples are educational estimates using the stated inputs only.
Download the 10-sheet pricing workbook
The download button above the results builds a formula-driven Excel workbook from your inputs. It opens in Microsoft Excel and Google Sheets, with live formulas you can edit:
Start Here — instructions, formulas, and the disclaimer.
Elasticity Calculator — midpoint and simple PED, classification, and revenue impact.
Pricing Scenario Simulator — a −30%…+30% table with best-revenue/profit and risk.
Ecommerce, SaaS, and Local models — fees, churn, capacity, and decisions.
Dashboard, Interpretation Table, Methodology, and a printable Summary.
Frequently asked questions
What is price elasticity of demand?
It measures how much quantity demanded changes when price changes — the percentage change in quantity divided by the percentage change in price.
How do you calculate price elasticity of demand?
Divide the percentage change in quantity demanded by the percentage change in price. The midpoint method uses the average of the two prices and quantities as the base.
What is the midpoint formula for elasticity?
PED = [(Q2−Q1)/((Q1+Q2)/2)] ÷ [(P2−P1)/((P1+P2)/2)]. It gives the same result whether price rises or falls between the two points.
Why is price elasticity usually negative?
Price and quantity demanded normally move in opposite directions, so the ratio is negative. Businesses usually interpret elasticity using its absolute value.
What does elastic demand mean?
Demand is elastic when |PED| is greater than 1 — quantity changes more than price, so customers are relatively price-sensitive.
What does inelastic demand mean?
Demand is inelastic when |PED| is less than 1 — quantity changes less than price, so a price increase tends to raise revenue.
Does raising price increase revenue?
If demand is inelastic, raising price usually increases revenue. If demand is elastic, raising price usually reduces revenue. If unit elastic, revenue stays broadly the same.
How can ecommerce businesses use price elasticity?
To test whether a discount or price increase helps after fees, shipping, returns, and COGS — and to find the extra units a discount needs to break even.
Can SaaS companies use price elasticity?
Yes, as a planning estimate for MRR, ARR, and churn. Subscription price sensitivity differs from one-time-purchase elasticity, so validate with a controlled rollout.
Is price elasticity enough to set prices?
No. Pricing also depends on competitors, costs, brand, customer segments, inventory, seasonality, and compliance. Elasticity is one input, not the whole decision.
What is the difference between revenue impact and profit impact?
Revenue is price × quantity. Profit subtracts variable and fixed costs. A change can raise revenue but cut profit (or the reverse), so always check both.
Can I download the calculation in Excel?
Yes. The 10-sheet Excel workbook includes the elasticity calculator, a −30%…+30% scenario simulator, ecommerce/SaaS/local models, a dashboard, and methodology — all with live formulas.
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Sources & disclaimer
The educational explanation follows standard microeconomics. Sources verified June 2026; links open in a new tab.
Last reviewed: 14 June 2026. Formula and assumptions reviewed for accuracy. First published 13 June 2026.
Pricing & business disclaimer
This calculator is for educational and planning purposes only. It does not guarantee customer behaviour, revenue, profit, or business outcomes. Real pricing decisions should consider competitors, costs, taxes, customer segments, brand strength, inventory, seasonality, and legal/compliance requirements.
Built and maintained by Calculator Matters, an independent calculator project. Inputs are processed in your browser and never stored. Engine and Excel formulas validated against hand-computed cases on every change · Last reviewed 14 June 2026 · How we calculate · Editorial policy · Privacy · Terms · Disclaimer · Found an error? [email protected]
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