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 = ( (QN - QI ) / (QN + QI ) / 2) / (( PN - PI ) / ( PN + PI ) / 2 )
Where:
PED is the Price Elasticity of Demand,
QN is the new quantity demanded,
QI is the initial quantity demanded,
PN is the new price,
PI is the initial price.
There are five types of price elasticity of demand. These are detailed in the table below.
