Price Elasticity of Demand (Midpoint)
Enter P₀, Q₀, P₁ and Q₁, then click Calculate to get PED, revenue change, and classification.
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Use this Price Elasticity of Demand Calculator to estimate how responsive quantity demanded is to a change in price. Enter two price and quantity points to calculate midpoint price elasticity of demand (PED), demand classification, and the change in total revenue.
Important: The calculator measures the relationship between two observed or hypothetical price-and-quantity points. It does not prove that the price change caused the change in demand.
Price Elasticity of Demand Formula
Price elasticity of demand compares the percentage change in quantity demanded with the percentage change in price:
PED = % change in quantity demanded ÷ % change in price
This calculator uses the midpoint method.
% change in quantity = (Q₁ − Q₀) ÷ [(Q₁ + Q₀) ÷ 2] × 100
% change in price = (P₁ − P₀) ÷ [(P₁ + P₀) ÷ 2] × 100
Signed PED = % change in quantity ÷ % change in price
Because price and quantity demanded normally move in opposite directions, PED is often negative. The calculator also shows its absolute magnitude:
PED magnitude = |Signed PED|
How to Interpret PED
- |PED| > 1: Elastic demand — quantity changes proportionally more than price.
- |PED| = 1: Unitary elastic demand — quantity and price change by approximately the same proportion.
- |PED| < 1: Inelastic demand — quantity changes proportionally less than price.
Worked Example
Suppose a product’s price increases from $10 to $12, while quantity demanded decreases from 100 units to 80 units.
Midpoint percentage change in quantity:
(80 − 100) ÷ [(80 + 100) ÷ 2] × 100 ≈ −22.22%
Midpoint percentage change in price:
($12 − $10) ÷ [($12 + $10) ÷ 2] × 100 ≈ 18.18%
Signed PED:
−22.22% ÷ 18.18% ≈ −1.22
PED magnitude:
|−1.22| = 1.22
Because the magnitude is greater than 1, demand is classified as elastic between these two points.
Revenue Change
Total revenue is:
Revenue = price × quantity
Before the change:
$10 × 100 = $1,000
After the change:
$12 × 80 = $960
Revenue change = $960 − $1,000 = −$40
In this example, price increased while total revenue decreased, which is consistent with elastic demand over the measured range.
Important Notes
- The midpoint method measures arc elasticity between two points; it does not estimate elasticity at every possible price.
- If there is no price change, PED cannot be calculated because the percentage change in price is zero.
- If price changes while quantity remains unchanged, PED is 0 over the two entered points.
- A positive signed PED means price and quantity moved in the same direction. Review the data and consider whether other demand factors changed at the same time.
- Advertising, seasonality, competitors, substitutes, customer income, promotions, stock availability, product quality, and market conditions can affect quantity demanded.
- Revenue is not the same as profit. Costs and margins must also be considered when making pricing decisions.
- The currency selector changes the displayed symbol only and does not convert exchange rates.