Price elasticity of demand
How much your volume moves when your price does — and what that means for revenue. The calculator below uses the midpoint formula and shows you what the simple one would have said instead, because the two disagree and almost nobody mentions it.
Short answer
What is price elasticity of demand?
How much the quantity sold responds to a change in price: percentage change in quantity divided by percentage change in price. Above one in absolute terms, raising the price costs you revenue. Below one, it earns you revenue.
The short version
- Normally negative, because quantity falls as price rises. A positive result means something other than price changed.
- The midpoint (arc) formula divides by the average of the two values and gives the same answer in both directions; the simple formula does not.
- Elasticity is local: it describes the stretch between the two prices you measured and does not extrapolate.
- It is only elasticity if price was the only thing that moved in the window — season, promotion and competitors all forge the same number.
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Two observations in, one answer about revenue out
The price and the quantity sold before a change, and the same two after it. Use the same period on both sides — a week against a week, a month against a month.
Before
Revenue $1000
After
Revenue $960
Demand moves more than price, so raising the price lowers revenue and cutting it raises revenue — near this segment of the curve.
Revenue in your own numbers went from $1000 to $960 — -4%.
The simple formula — dividing by the starting values instead of the averages — gives -1.00, a difference of 18%. It is the one most calculators use without saying so, and it is not symmetric: measure the same two points in the other direction and it changes.
- The two formulas disagree by 18%. Your price change is large, and on a large change the simple formula depends on which end you measure from. Use the midpoint figure and treat the segment as rough.
# PRICE ELASTICITY OF DEMAND Date: 2026-09-12 Before: $10 × 100 units = $1000 After: $12 × 80 units = $960 Revenue change: -4% Elasticity (midpoint/arc): -1.22 Elasticity (simple): -1.00 Verdict: Elastic Demand moves more than price, so raising the price lowers revenue and cutting it raises revenue — near this segment of the curve. ⚠️ The two formulas disagree by 18%. Your price change is large, and on a large change the simple formula depends on which end you measure from. Use the midpoint figure and treat the segment as rough. ## What this does NOT say Elasticity is a LOCAL property of a demand curve: it describes the stretch between these two points and nothing beyond it. And it is only elasticity if the price was the only thing that changed — a season, a promotion or a competitor moving in the same window makes this arithmetic, not a measurement. Calculated with the free tool at https://gonogo.team/price-elasticity
What this cannot know. Whether the price was the only thing that changed. A season, a promotion, a competitor launching or a different mix of customers in the second window all move quantity, and the arithmetic cannot tell them apart from the price. It also describes only the stretch between your two points: elasticity varies along a demand curve, so a figure measured between $10 and $12 says nothing about what happens at double that.
If you have no two observations to compare — because nothing has been sold yet — Gabor-Granger builds a demand curve from a survey instead, and the evidence ladder says how much that is worth.
Elasticity needs history. Before there is any, the question is whether there is demand at all. A 15-minute session ends with a written GO / WAIT / NO-GO and the reasoning behind it. Free tier, no card.
The two formulas, and why they disagree
Both start the same way: percentage change in quantity, divided by percentage change in price. The difference is what you divide by to get a percentage.
The simple formula divides by the starting value. Going from 10 to 12 is a 20% rise. Coming back from 12 to 10 is a 16.7% fall. Same two numbers, same stretch of the same curve, two different percentages — and therefore two different elasticities depending on which observation you happened to call “before”.
The midpoint formula divides by the average of the two. Both directions give 18.2%, and the elasticity comes out the same whichever way you measure. This is why economics textbooks teach it and why the calculator above leads with it.
For a 1% price change the two agree to within a rounding error, and the distinction does not matter. For the changes founders actually make — 20%, 50%, doubling — it matters a great deal, and a calculator that silently picks the simple one is giving you an answer that depends on the order you typed your rows in.
How to read the number
Elastic
Quantity moves more than price, in percentage terms. Raising the price loses more volume than it gains margin, so revenue falls. Typical of things with close substitutes and no switching cost.
Inelastic
Quantity moves less than price. Raising the price raises revenue — which is where a great many founders discover they have been charging too little for years. Typical of necessities, habits, and anything embedded in a workflow.
Unit elastic
The two move together and revenue is flat in either direction. On a straight demand curve this is the point where revenue peaks: elastic above it, inelastic below.
Not elasticity at all
Demand rose along with price. Almost always this means something else changed between the two observations. The calculator says so rather than printing a positive number as though it were a result.
What elasticity cannot tell you
It cannot separate price from everything else. If the second window contained a holiday, a campaign, a competitor's launch or simply a different mix of customers, the number is a summary of all of it with the price's name on it.
It does not extrapolate. Elasticity changes as you move along a demand curve — usually towards more elastic as price rises. A figure measured between $10 and $12 tells you very little about $30.
Revenue is not profit. An inelastic result says a price rise would grow revenue. It says nothing about support load, churn a quarter later, or the one large customer whose departure outweighs the arithmetic.
And it needs two real observations. If nothing has been sold at two different prices, there is no elasticity to compute — only a survey, which is a different and weaker kind of evidence.
No sales yet? Then this is the wrong tool
Elasticity needs history. Before there is any, the question is not how demand responds to price — it is whether there is demand at all, which is one of three critical criteria in our Go/No-Go rubric.
A 15-minute session works through all seven and ends with a written verdict and the reasoning behind it.
15 min · free tier, no card
Frequently asked questions
What is price elasticity of demand?+
What is the formula for price elasticity?+
What does an elasticity of -1.5 mean?+
Does inelastic demand mean I should raise prices?+
Why did my elasticity come out positive?+
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