Price Elasticity of Demand Calculator

The Midpoint Formula, Step by Step

% change in quantity = (Q₂ − Q₁) ÷ [(Q₂ + Q₁) ÷ 2] × 100
% change in price = (P₂ − P₁) ÷ [(P₂ + P₁) ÷ 2] × 100
Elasticity = % change in quantity ÷ % change in price

1. Quantity: (2,800 − 3,000) ÷ 2,900 = −6.9%.
2. Price: ($70 − $60) ÷ $65 = 15.4%.
3. Elasticity: 6.9 ÷ 15.4 = 0.45. Demand elasticity is reported as an absolute value because price and quantity demanded move in opposite directions.

The calculator reproduces all three OpenStax section 5.1 examples: 0.45 for this one, 1.47 for the Work It Out case ($120 to $130, 1,800 to 1,600), and a price elasticity of supply of 3.5 for apartments ($650 to $700, 10,000 to 13,000 units), which is 3.52 before OpenStax rounds the two percentages.

Elastic, Inelastic and Unitary

Midpoint vs Point Method: Why the Direction Matters

With the starting values as the base (the point or simple method), the same two points give different answers depending on which way the price moves: 0.40 for the increase from $60 and 0.50 for the decrease from $70. The midpoint method gives 0.45 both ways, which is why textbooks use it for a change between two prices. Calculus-based point elasticity at a single price on a known demand curve is a different measure again.

Price Changes and Revenue

The online store loses revenue on its price rise because its customers respond strongly (elastic); the coffee shop and the first OpenStax example gain, and the elastic Work It Out case loses. The discount case shows the reverse: cutting price on an inelastic product brings in less money even though it sells more units.

Other Elasticities

• Price elasticity of supply: the same formula with quantity supplied, positive because both rise together. Choose “quantity supplied” in the calculator.
• Income elasticity: % change in quantity ÷ % change in income; negative for inferior goods.
• Cross-price elasticity: % change in quantity of one good ÷ % change in price of another; positive for substitutes, negative for complements.

Common Mistakes

• Mixing the base. Use the midpoint for both percentage changes, or the starting values for both, never one of each.
• Reading the sign as the size. −0.45 and 0.45 describe the same inelastic demand.
• Treating one estimate as permanent. Elasticity differs along a demand curve and grows over longer periods as buyers find substitutes.
• Ignoring other changes. If a competitor cut prices or a season changed at the same time, the quantity change is not all due to your price.

What This Calculator Does Not Cover

It measures elasticity between two observed points. It does not estimate a demand curve from many data points, separate price effects from other causes, or set an optimal price; for that, a pricing test with a control group or a regression on sales data is the usual approach, and a business with significant sales at stake may want an economist or pricing analyst. Revenue here is price times quantity, not profit; use the break-even or margin calculators to add costs.

Frequently Asked Questions

How to Use This Calculator

1. Enter the two prices — the starting price and the new price.
2. Enter the two quantities — the quantity sold (or supplied) at each price.
3. Choose the method and quantity type — midpoint for a change between two prices; point to use the starting values; demand or supply.
4. Read the results — both percentage changes, the elasticity, whether it is elastic or inelastic, and revenue before and after.