Price Elasticity of Demand (PED)
Calculate the price elasticity of demand and classify goods as elastic, inelastic, or unit elastic. Also computes the revenue impact of a price change.
Results
What is it?
Price Elasticity of Demand (PED) = % Change in Quantity Demanded / % Change in Price. |PED| > 1 = elastic (consumers are price-sensitive; a price rise reduces revenue). |PED| < 1 = inelastic (consumers are insensitive; a price rise increases revenue). |PED| = 1 = unit elastic (revenue unchanged).
How to use
Enter the original and new prices, and the quantities demanded at each price point (from sales data, surveys, or market research). The calculator computes PED and shows the revenue impact of the price change.
Example scenario
Price rises from $100 to $120 (+20%). Quantity drops from 1000 to 800 (−20%). PED = −20/+20 = −1.0. Unit elastic — total revenue is unchanged at $100,000. If quantity drops only to 900, PED = −0.5 (inelastic) and revenue rises from $100k to $108k.
Pro tip
Necessities (insulin, fuel) tend to be inelastic; luxuries (designer goods, holidays) tend to be elastic. Firms in inelastic markets should raise prices to increase revenue; firms in elastic markets should cut prices. Always sign-check: PED is normally negative (price ↑ → demand ↓). Some textbooks use the absolute value.