# What is price elasticity of demand?

Finds the price elasticity of demand by the midpoint method from two prices and the quantities sold at each, says whether demand is elastic, inelastic or unit elastic, and shows the change in revenue.

- Page: https://www.acalculator.org/finance/price-elasticity-of-demand-calculator
- JSON spec: https://www.acalculator.org/finance/price-elasticity-of-demand-calculator.json
- Version: 68e99540948d

## Default answer

Example with the default inputs (Starting price $70.00, Quantity at the starting price 2,800, New price $60.00, Quantity at the new price 3,000): The price elasticity of demand is 0.45: demand is inelastic.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| p1 | Starting price | The price before the change. |
| q1 | Quantity at the starting price | How many units buyers want at the starting price. |
| p2 | New price | The price after the change. |
| q2 | Quantity at the new price | How many units buyers want at the new price. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| elasticity | Price elasticity of demand | The size of % change in quantity ÷ % change in price (midpoint method), without its sign. |
| kind | Demand is | Elastic above 1, unit elastic at 1, inelastic below 1, perfectly inelastic at 0. |
| signed | Elasticity with its sign | % change in quantity ÷ % change in price; negative when price and quantity move in opposite directions. |
| quantityChange | % change in quantity | (Q₂ − Q₁) ÷ ((Q₁ + Q₂) ÷ 2) × 100. |
| priceChange | % change in price | (P₂ − P₁) ÷ ((P₁ + P₂) ÷ 2) × 100. |
| revenue1 | Revenue before | Starting price × starting quantity. |
| revenue2 | Revenue after | New price × new quantity. |
| revenueChange | Change in revenue | Revenue after minus revenue before. |

## Method

Elasticity = (% change in quantity) ÷ (% change in price), where each % change = (new − old) ÷ ((new + old) ÷ 2) × 100 (the midpoint method), shown without its sign.

## Assumptions

- The midpoint (arc) method, so going from A to B gives the same elasticity as going from B to A.
- Everything else that affects demand stays the same between the two points.
- Prices are at least $0.01; quantities are 0 or more, not both 0.

## Worked examples

1. p1 = $70.00, q1 = 2,800, p2 = $60.00, q2 = 3,000 gives elasticity = 0.448276, kind = inelastic, quantityChange = 6.896552%, priceChange = -15.384615%, revenue1 = $196,000.00, revenue2 = $180,000.00, revenueChange = -$16,000.00. Source: OpenStax, Principles of Economics 3e, §5.1 Price Elasticity of Demand and Price Elasticity of Supply (midpoint method: % change = (new − old) ÷ ((new + old) ÷ 2) × 100; elasticity = % change in quantity ÷ % change in price; from $70 and 2,800 to $60 and 3,000 the elasticity is 0.45, inelastic; elastic above 1, unitary at 1, inelastic below 1), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-10-02) (6.9%, −15.4%, 0.45).
2. p1 = $4.00, q1 = 6, p2 = $6.00, q2 = 4 gives elasticity = 1, kind = unit elastic, quantityChange = -40%, priceChange = 40%, revenueChange = $0.00. Source: OpenStax, Principles of Economics 3e, §5.1 Price Elasticity of Demand and Price Elasticity of Supply (midpoint method: % change = (new − old) ÷ ((new + old) ÷ 2) × 100; elasticity = % change in quantity ÷ % change in price; from $70 and 2,800 to $60 and 3,000 the elasticity is 0.45, inelastic; elastic above 1, unitary at 1, inelastic below 1), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-10-02).
3. p1 = $10.00, q1 = 100, p2 = $12.00, q2 = 70 gives elasticity = 1.941176, kind = elastic, signed = -1.941176, quantityChange = -35.294118%, priceChange = 18.181818%, revenueChange = -$160.00. Source: OpenStax, Principles of Economics 3e, §5.1 Price Elasticity of Demand and Price Elasticity of Supply (midpoint method: % change = (new − old) ÷ ((new + old) ÷ 2) × 100; elasticity = % change in quantity ÷ % change in price; from $70 and 2,800 to $60 and 3,000 the elasticity is 0.45, inelastic; elastic above 1, unitary at 1, inelastic below 1), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-10-02).
4. p1 = $5.00, q1 = 50, p2 = $6.00, q2 = 50 gives elasticity = 0, kind = perfectly inelastic, revenueChange = $50.00. Source: OpenStax, Principles of Economics 3e, §5.1 Price Elasticity of Demand and Price Elasticity of Supply (midpoint method: % change = (new − old) ÷ ((new + old) ÷ 2) × 100; elasticity = % change in quantity ÷ % change in price; from $70 and 2,800 to $60 and 3,000 the elasticity is 0.45, inelastic; elastic above 1, unitary at 1, inelastic below 1), https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-10-02).

## FAQ

### What is the price elasticity of demand?

How strongly the quantity buyers want responds to a change in price: the percent change in quantity divided by the percent change in price. An elasticity of 0.45 means a 1% price change moves quantity by about 0.45% the other way.

### What is the midpoint method?

Each percent change is measured against the average of the two values, not the starting one: (new − old) ÷ ((new + old) ÷ 2) × 100. So a move from A to B gives the same elasticity as a move from B to A.

### How do I calculate it with the midpoint formula?

From $70 and 2,800 units to $60 and 3,000 units: % change in quantity = 200 ÷ 2,900 = 6.9%; % change in price = −10 ÷ 65 = −15.4%. The elasticity is 6.9 ÷ 15.4 = 0.45 (OpenStax Principles of Economics, section 5.1).

### What do elastic and inelastic mean?

Elastic demand (above 1) responds strongly: quantity changes by a larger percent than price. Inelastic demand (below 1) responds weakly. At exactly 1 it is unit elastic, and at 0 perfectly inelastic: quantity does not change at all.

### Why is the answer shown without a minus sign?

Price and quantity demanded usually move in opposite directions, so the raw ratio is negative. Economists, OpenStax included, usually quote its absolute value. The signed value is shown too.

### How does elasticity affect revenue?

With inelastic demand, a price cut lowers revenue (fewer extra sales than the cut costs): the $70 to $60 example drops revenue from $196,000 to $180,000. With elastic demand, a price cut raises revenue. At unit elasticity revenue stays the same.

## Sources

- OpenStax, Principles of Economics 3e, §5.1 Price Elasticity of Demand and Price Elasticity of Supply (midpoint method: % change = (new − old) ÷ ((new + old) ÷ 2) × 100; elasticity = % change in quantity ÷ % change in price; from $70 and 2,800 to $60 and 3,000 the elasticity is 0.45, inelastic; elastic above 1, unitary at 1, inelastic below 1). https://openstax.org/books/principles-economics-3e/pages/5-1-price-elasticity-of-demand-and-price-elasticity-of-supply (retrieved 2026-10-02)