Break-even point
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Business basicsEconomics 101
Price elasticity calculator
Raise the price. What happens to demand?
Your numbers
Measure how quantity responds to a price change using the midpoint method.
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THE MATH, WITHOUT THE MYSTERY
What’s actually happening here?
Price elasticity measures how responsive quantity is to a price change. The midpoint method uses the average of the old and new values so swapping the two observations gives the same elasticity.
We show both the signed result and its magnitude. A magnitude above 1 is elastic, below 1 is inelastic, and 1 is unit elastic. A positive signed value means price and quantity moved together; other changing factors may be involved.
THE FORMULA
Elasticity = ((Q₂ − Q₁) / average Q) / ((P₂ − P₁) / average P)
A small example
Price rises from 10 to 12 while quantity falls from 100 to 80. The midpoint quantity change is −22.22%, price change is +18.18%, and elasticity is about −1.22: elastic in magnitude.
Further reading
OpenStax · Price elasticity and the midpoint methodGOOD QUESTIONS
A few things worth knowing.
Why use the midpoint method?
It avoids getting two different percentage elasticities simply because you reverse the starting and ending observations.
Does elasticity tell me the best price?
Not on its own. Costs, competitors, capacity, seasonality, and other demand drivers also matter. Two observed points do not identify a full demand curve.