Price Elasticity Calculator
Price elasticity measures how much demand changes when price changes. It decides whether a price rise increases revenue or loses more in volume than it gains in price.
Everything above runs in your browser and saves to this device only. Enter two prices and the units sold at each. The sample is a hotel member rate raised from 165 to 179.
How it works
The arc formula uses the midpoint of the two observations, so the answer is the same whichever price you call the first.
Elastic when the absolute value is above 1, inelastic below 1
Linear demand Q = a − bP through both points: revenue peaks at a ÷ 2b, contribution peaks at (a + b × cost) ÷ 2b
The straight demand line is an assumption that holds best near the two observed prices. Treat the optimal prices as a direction to test.
Frequently Asked Questions
What is price elasticity of demand?
Price elasticity of demand is the percentage change in quantity demanded divided by the percentage change in price. An elasticity of -1.5 means a 1% price rise cuts sales by about 1.5%.
How do you calculate price elasticity with two price points?
Use the arc formula: the change in quantity over the average quantity, divided by the change in price over the average price. Using the midpoint gives the same answer in either direction.
What is the difference between elastic and inelastic demand?
Demand is elastic when the absolute elasticity is above 1, so a price rise loses more in volume than it gains in price and revenue falls. Demand is inelastic below 1, so a price rise increases revenue.
How do you find the profit-maximising price?
With a straight-line demand curve Q = a minus bP through two observed points, contribution peaks at (a + b times unit cost) divided by 2b. Treat it as a direction to test, since real demand curves bend.
Is this Price Elasticity Calculator free?
Yes. The Price Elasticity Calculator is free and opens straight away in any modern browser, including on a phone. Everything you enter is processed in your browser and stays on your device.