What this calculator measures
Price elasticity of demand measures how sensitive quantity demanded is to price changes.
Common use cases
Use this model when the inputs describe the same decision, period and customer or product scope.
- Estimate midpoint price elasticity from two prices and two quantity levels.
- Use the result with the recorded inputs: Original price, New price, Original quantity, New quantity.
- Compare multiple scenarios before making a business decision.
Formula
Elasticity = midpoint % change in quantity ÷ midpoint % change in price
The midpoint method reduces dependence on which observation is treated as the starting point.
Worked example
A 10% price increase leading to a 15% drop in quantity yields an elasticity of -1.5.
How to interpret the result
Elastic demand means revenue drops if prices rise; inelastic means revenue increases.
Assumptions and limitations
- Consumer preferences and external market conditions remain constant.