Explore the intricate relationship between the price and the demand effortlessly by using the price elasticity of demand calculator. Our midpoint method calculator is a powerful economic tool that quantifies the change in price which will lead to increased or decreased sales.
Concept of Price Elasticity of Demand:
“The ratio of a percentage of the change in the quantity of any product to the change in price is known as price elasticity”.
The price elasticity of demand formula calculator measures the range to which a customer is responsive to the prices of a product or service.
Types of Elasticity Demand:
|Type of Elasticity||PED Value|
|Elastic Demand|||PED| > 1|
|Unitary Elastic|||PED| = 1|
|Inelastic Demand|||PED| < 1|
|Perfectly Inelastic|||PED| = 0|
|Perfectly Elastic|||PED| = Infinity|
Formula to Calculate the Elasticity of Demand:
According to the price elasticity formula, order elasticity is price dependent and can be determined by dividing the change in quantity by the percentage change in price.
PED = (Change in Quantity / Initial Quantity) / (Change in Price / Initial Price)
PED = [( Q1 − Q0 ) / [( Q1 + Q0 ) / 2] / ( P1 − P0 )/[( P1 + P0 ) / 2]
PED = ∆Q/Q / ∆P/P
- PED = Price elasticity of demand
- P0 = Initial price of product
- P1 = Final price of product
- Q0 = Initial demand for product
- Q1 = Demand after price variation
Usually, the price demand value is negative indicating the inverse relation between price and demand.
Assume, you sell a product for $10, and after increasing the price to $15, you notice that your quantity sold has decreased from 100 to 80 units. Using our price elasticity of demand calculator, you can find the price elasticity:
Price Elasticity of Demand (PED) = ((Change in Quantity / Initial Quantity) / (Change in Price / Initial Price))
PED = (80 - 100) / 100) / ($15 - $10) / $10)
PED = (-20 / 100) / ($5 / $10)
PED = (-0.2) / (0.5)
PED = -0.4
The price elasticity of demand is -0.4 so it is less than 1 that indicates the increase in price didn’t significantly reduce the quantity sold. This insight can guide your pricing strategy effectively.
From Input to Results - Walkthrough Price Elasticity Calculator
Our demand elasticity of demand calculator is designed for elasticity calculations, allowing you to make informed pricing decisions that drive profitability. It determines whether your product has elastic or inelastic demand.
What To Do?
- The demand elasticity calculator evaluates the change in quantity by changing its price by considering three ways so choose how you want to calculate PED.
- For exact estimation of price elasticity, initial and new prices at its core so put these in the designated field of the tool
- Set Initial Quantity and new quantity range
- When it comes to solving the revenue you need to insert two values to know the third.
What You Get?
- Price Elasticity of Demand: Our price elasticity of demand calculator will enable you to explore the diverse features of elasticity by knowing the elasticity of order based on price and also indicate which it belongs to by which type.
- Elasticity Summary: Understand the step-by-step calculations to quantify how sensitive consumers are to price fluctuations to boost revenue.
- Revenue Table: A complete revenue table provides a complete sense of the financial consequences of pricing which shows how pricing changes can impact your bottom line.
Does Elasticity Affect the Company's Price Policy?
Yes, price elasticity of demand has an impact on a company's price policy like there is an increase in prices in the products of companies by rising in their expenses.
What if the Elasticity is Greater than 1?
If the elasticity is greater than 1 (in absolute value), it indicates elastic demand. This means that consumers are quite responsive to price changes, and a price increase will lead to a significant decrease in the quantity demanded.
What if the Elasticity is Less than 1?
If the elasticity is less than 1 (in absolute value), it indicates inelastic demand. In this case, consumers are less responsive to price changes, and a price increase will result in a smaller decrease in the quantity demanded.
Wikipedia: Price elasticity of demand, Relation to marginal revenue, Effect on entire revenue, Effect on tax incidence, Optimal pricing.