Price elasticity of demand tells you how sensitive buyers are to a price change — and that sensitivity, not the price change itself, decides whether a price move grows or shrinks your revenue. This calculator turns a starting and new price/quantity pair into a single elasticity figure, an elastic/inelastic verdict, and the resulting revenue impact.

Midpoint vs. point: why the base matters

Elasticity is a ratio of two percentage changes, and a percentage change needs a base. The point method uses the starting value as that base — simple, but it means a $100→$110 move (a 10% rise) and a $110→$100 move (a 9.1% fall) describe the exact same two prices with two different percentages, purely because of which one you call "first."

The midpoint method fixes this by using the average of the two values as the base for both directions, so the calculated |PED| is identical no matter which price you start from. That symmetry is why midpoint is the standard method taught in economics courses and used in most textbook elasticity tables — the calculator defaults to it, while still offering point for anyone reconciling a homework answer or a source that used the simpler method.

Elasticity decides what a price change does to revenue

Total revenue is just price times quantity, so a price change always pulls revenue in one direction directly (through the new price) and the opposite direction through its effect on quantity demanded. Which effect wins depends on elasticity: for an elastic good (|PED| > 1), the quantity effect dominates, so cutting price raises revenue and raising price lowers it. For an inelastic good (|PED| < 1), the price effect dominates, so raising price raises revenue.

This is why airlines discount economy seats (elastic — leisure travelers shop around) but not gate-change rebooking fees (inelastic — no substitute in the moment), and why a monopoly utility can raise rates and gain revenue even as usage dips slightly.

Limits of a two-point estimate

PED calculated from two price/quantity pairs is an arc elasticity — an average slope between two points on the demand curve, not the true instantaneous elasticity at either point. Real demand curves usually aren't straight lines, so the further apart your two points are, the less precisely the result describes behavior at either endpoint individually.

The calculation also assumes nothing else changed between the two observations — no shift in income, competitor pricing, seasonality, or advertising. In practice, isolate a genuine price-only comparison (e.g., a controlled price test or two comparable periods) before trusting the elasticity figure for a pricing decision.