Financial Calculators

Price Elasticity of Demand Calculator

Q: What does a PED greater than 1 mean?

A PED absolute value > 1 indicates Elastic demand, meaning consumers are very sensitive to price changes.

Calculate Price Elasticity of Demand (PED) using the midpoint arc formula. Determine elasticity category and revenue impact.

Reviewed by David Miller, CPA (CPA, M.S. Finance (NYU Stern))

Verified for accuracy•Updated 2026

Interactive Calculator

1. Provide Details

Initial Price P1 ($)

New Price P2 ($)

Initial Quantity Sold Q1

units

New Quantity Sold Q2

units

2. Output Results

Price Elasticity Coefficient (PED)-1.22

Demand ClassificationElastic Demand (|PED| > 1 - Price Sensitive)

Net Revenue Impact-$40.00 $

How to Calculate: Formula & Steps

Applies the standard midpoint arc elasticity formula to avoid direction bias between initial and final price-quantity points.

Formula Used:PED = [ (Q2 - Q1) / ((Q1 + Q2)/2) ] ÷ [ (P2 - P1) / ((P1 + P2)/2) ]

Step-by-Step Calculation Example

If price increases from $10 to $12 (+18.2%) and sales drop from 100 to 80 units (-22.2%), PED is -1.22 (Elastic demand, total revenue decreases).

Common Mistakes to Avoid

Confusing percentage change with absolute unit changes when analyzing price increases.

Practical Use Cases

E-commerce product pricing strategy
Economics coursework and business revenue optimization

Expert Tips

For inelastic goods (|PED| < 1), raising prices increases total gross revenue.

Disclaimer

This calculation tool is provided for educational and informational estimation purposes only. Results are based on mathematical formulas and user-supplied parameters. They do not constitute formal underwriting, financial, tax, engineering, or legal determinations.