Price Elasticity of Demand Calculator
Calculate price elasticity of demand: how quantity demanded changes with price changes. Formula: (% change in quantity) ÷ (% change in price). Elasticity > 1 = elastic (demand sensitive to price), Elasticity < 1 = inelastic (demand insensitive to price).
Formula
PED = (% change in quantity demanded) ÷ (% change in price)
- % Change in Quantity = ((Q2 - Q1) / Q1) × 100
- % Change in Price = ((P2 - P1) / P1) × 100
- Elasticity > 1: Elastic (demand changes more than price)
- Elasticity = 1: Unit Elastic (demand changes proportionally with price)
- Elasticity < 1: Inelastic (demand changes less than price)
- Negative elasticity typical (higher price → lower quantity)
- Used in business pricing strategy and economic policy
Example
Inputs
- Initial Quantity Demanded: 100
- New Quantity Demanded: 80
- Initial Price: 10
- New Price: 12
Initial quantity: 100 units at price $10. New quantity: 80 units at price $12. Quantity change: -20%, Price change: +20%, Elasticity: -1.0 (unit elastic). A 1% price increase leads to 1% quantity decrease.
Frequently asked questions
What does elasticity mean?
Elasticity measures how responsive quantity demanded is to price changes. Higher absolute elasticity = more responsive.
What's elastic vs inelastic?
Elastic: |E| > 1 (quantity changes a lot). Inelastic: |E| < 1 (quantity changes a little). Example: luxury goods are elastic, necessities are inelastic.
Why is elasticity negative?
Demand slopes downward: as price increases, quantity demanded decreases (normal inverse relationship).
When should I use this?
Use when analyzing how price changes affect sales volume, for pricing strategy, or understanding market dynamics.
What's a typical elasticity value?
Most products: -0.5 to -2.0. Luxury goods: -2 to -3+. Necessities: -0.1 to -0.5.