A Price Elasticity of Demand (PED) Calculator is a tool that measures how sensitive consumer demand is to a change in price.
It helps businesses, economists, and marketers understand how a price increase or decrease is likely to affect sales.
Basic Formula
Price Elasticity of Demand (PED)PED=% Change in Price% Change in Quantity Demanded
Since price and demand usually move in opposite directions, PED is often negative, but many calculators display the absolute value.
Example
Suppose:
- Price increases from $10 to $12
- Quantity demanded falls from 100 units to 80 units
Percentage changes:
- Price change = 1012−10×100=20%
- Quantity change = 10080−100×100=−20%
PED:PED=20%−20%=−1.0
The absolute value is 1.0, meaning demand is unit elastic.
Interpreting the Result
| PED Value | Meaning |
|---|---|
| Greater than 1 | Elastic demand (customers are sensitive to price changes) |
| Equal to 1 | Unit elastic demand |
| Less than 1 | Inelastic demand (customers are less sensitive to price changes) |
| Equal to 0 | Perfectly inelastic demand |
| Very large/infinite | Perfectly elastic demand |
Examples of Elastic vs. Inelastic Products
Elastic demand:
- Luxury goods
- Brand-name products with many substitutes
- Entertainment services
Inelastic demand:
- Gasoline/fuel
- Prescription medications
- Basic utilities
Why Use a Price Elasticity of Demand Calculator?
It helps you:
- Set optimal prices
- Forecast sales changes
- Estimate revenue impacts
- Understand customer behavior
- Make marketing and pricing decisions
Revenue Impact
- If demand is elastic, raising prices may reduce total revenue.
- If demand is inelastic, raising prices may increase total revenue.
- If demand is unit elastic, revenue tends to remain roughly unchanged.
In short, a Price Elasticity of Demand Calculator measures how much demand changes when the price changes, helping businesses make better pricing decisions.