Price Elasticity of Demand Calculator

Old Price: $10, New Price: $12, Old Quantity: 100, New Quantity: 80 Step 1: % Price Change = (12−10) / ((10+12)/2) = 18.18% Step 2: % Quantity Change = (80−100) / ((100+80)/2) = −22.22% Step 3: PED = −22.22% / 18.18% = −1.222 Result: Elastic demand (|PED| > 1)

Price Elasticity of Demand (PED) is a crucial economic measure that quantifies the responsiveness of the quantity demanded of a good or service to a change in its price. It helps businesses understand how much their sales volume will shift if they adjust their prices.\n\nA high PED indicates that consumers are very sensitive to price changes, meaning a small price increase could lead to a significant drop in sales. Conversely, a low PED suggests that demand is relatively inelastic, and consumers will continue buying roughly the same amount even if prices change.\n\nThe midpoint method, also known as arc elasticity, is often preferred for calculating PED because it provides a more accurate and consistent result, regardless of whether you are calculating a price increase or decrease. This method averages the initial and final prices and quantities, ensuring the elasticity coefficient is the same in both directions. Understanding PED is vital for strategic pricing decisions, product development, and revenue forecasting.