🎓 Finance & Economics • Micro & Macro Economics
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Price Elasticity of Demand (PED) Calculator
Computes price elasticity of demand using the midpoint formula and classifies market responsiveness.
Price Elasticity of Demand (PED) Arc Midpoint Solver
Measures consumer price sensitivity and predicts revenue impact of price adjustments
Scenarios:
Price Elasticity Coefficient (PED)
-1.57
Price Elastic (|PED| > 1)
Price increased on elastic demand: Total Revenue DECREASES (volume loss outweighs price gain).
Initial Revenue (P₁ × Q₁)$10,000
New Revenue (P₂ × Q₂)$9,000
Revenue Delta$-1,000
Demand Curve (D) & Price/Quantity Arc:
PED = (%ΔQ = -28.57%) / (%ΔP = 18.18%) = -1.57 [|PED| = 1.57]
What is Price Elasticity of Demand (PED)?
Price elasticity of demand (PED) measures the responsiveness of the quantity demanded for a good to a change in its price, showing how consumers alter purchases when prices shift.
Formula & Step-by-Step Calculation
PED = [ (Q₂ - Q₁) / ((Q₁+Q₂)/2) ] / [ (P₂ - P₁) / ((P₁+P₂)/2) ]
Arc midpoint elasticity formula.
Worked Step-by-Step Examples
Example 1
Price rises from $10 to $12; quantity drops from 1000 to 750
Solution: PED = -1.57 (Price Elastic, |PED| > 1)
• %ΔQ = -250 / 875 = -28.57%; %ΔP = 2 / 11 = 18.18%; PED = -28.57 / 18.18 = -1.57
Common Real-World & Academic Use Cases
- ✓ AP / IB Microeconomics problem sets
- ✓ Corporate pricing revenue optimization strategies
- ✓ Government taxation policy tax burden predictions
How to Use the Price Elasticity of Demand (PED) Calculator
1
Enter P1 and Q1
Input initial price and sales volume.
2
Enter P2 and Q2
Input new price and resulting sales volume.
3
Read Elasticity
Inspect coefficient and economic classification.
Frequently Asked Questions
Q: What happens to total revenue if demand is elastic and price increases?
Total revenue decreases, because the percentage drop in quantity demanded is greater than the percentage rise in price.