Price Elasticity of Demand Calculator

What is Price Elasticity of Demand?

Price elasticity of demand is a way to measure the responsiveness to a change in quantity and price of a product or service to assess if it is a good idea or not.

How to Calculate Price Elasticity of Demand

We promise that the formula is not as confusing as the term itself. To find this, you can use the following formula:

Price Elasticity of Demand = % change in quantity demanded / % change in price

Using this formula, you will need to find the difference between these two sets of values. Once you have that, plug and play with the numbers and you will have your answer.

Understanding Your Results

Elastic Demand (PED > 1)

If your answer ends up being more than 1, that can mean a few things:

1. This can indicate that demand is sensitive to price changes, making price changes affect demanded quantity in larger ways.


2. If you have a PED of 1.5, this indicates that for every 1% increase in price, the quantity demanded decreases by 1.5%.

If you are the consumer, an elastic price can be both good. It may lead businesses to not be able to raise their prices as they would be afraid to experience a large fall in demand.

Inelastic Demand (PED < 1)

If your answer ends up being less than 1, that can mean a few things:

1. This can indicate that demand is not sensitive to price changes, making price changes not have a large impact on demanded quantity.


2. If you have a PED of .5, this indicates that for every 1% increase in price, the quantity demanded decreases by just .5%.

This is good for businesses as they will know that they can freely raise their prices to get more out of their customers, knowing that their demand will not experience a large loss.

Unit Elastic Demand (PED = 1)

You can have a price elastic demand of 1, where the change in price will equal the change in demand. This means if you raise the price by 1%, you can expect to see a 1% drop in demand.

How to Use the Price Elasticity Calculator

Our free tool is extremely easy to use. This only requires a few steps:

1. Enter the initial price


2. Enter the initial quantity associated with that price


3. Enter the final price


4. Enter the final quantity associated with the final price


5. Hit calculate and get the elasticity in under a second

Calculation Example

Let's say you own an apple store. At first you were selling 20,000 apples a month for $2 a piece. You decide to test out a new price the next month, making it $2.49 per apple and only sold 14,750 apples in that month. We can use the price elasticity of demand formula to understand this more.

PED = -0.2625 / 0.245 = -1.0714 PED

Since the number is negative we can take its absolute value, making it equal to 1.0714. Since the result is above 1, the demand is deemed elastic, indicating the percent change in demand is slightly greater than the percent change in price.

Last Modified Date: September 05, 2024