# Price Elasticity of Demand Calculator

You can use this price elasticity of demand calculator to calculate the price elasticity of demand. Price elasticity of demand is a measurement that determines how demand for goods or services may change in response to a change in the prices of those goods or services.

## What is Price Elasticity of Demand?

Price elasticity measures the extent to which a customer is sensitive to the prices of a product or service. Analysts frequently use it to determine what impact a change in the price of something will have on demand.

The basic understanding that underpins the concept of price elasticity is based on a fundamental assumption: There is a direct correlation between price and demand; i.e., the more the prices of products increase, the less demand there will be for them. However, in reality, price elasticity rarely functions as a direct causal relationship because products typically fall into different categories according to their importance and value to the consumer.

## Formula for Price Elasticity of Demand

The PED calculator employs the midpoint formula to determine the price elasticity of demand.

Price Elasticity of Demand (PED) = % Change in Quantity Demanded / % Change in Price

PED = ( (Q_{N} - Q_{I} ) / (Q_{N} + Q_{I} ) / 2) / (( P_{N} - P_{I} ) / ( P_{N} + P_{I} ) / 2 )

*Where:*

**PED** is the Price Elasticity of Demand,

**Q _{N}** is the new quantity demanded,

**Q _{I}** is the initial quantity demanded,

**P _{N}** is the new price,

**P _{I}** is the initial price.

There are five types of price elasticity of demand. These are detailed in the table below.