Price Elasticity Calculator
Enter two price-quantity points. Get the elasticity coefficient (midpoint / arc formula), the classification, and what it means for total revenue.
| |Ed| | Class | What it means |
|---|---|---|
| 0 | Perfectly inelastic | Quantity doesn't move — insulin, single-source pharmaceuticals. |
| 0 < |E| < 1 | Inelastic | Quantity moves less than price. Raising price raises revenue. Gasoline, cigarettes, electricity. |
| |E| = 1 | Unit-elastic | Quantity and price move proportionally. Revenue unchanged. |
| |E| > 1 | Elastic | Quantity moves more than price. Raising price cuts revenue. Restaurants, brand-name goods with substitutes. |
| ∞ | Perfectly elastic | Any price change wipes out demand — theoretical case for perfect substitutes. |
The naive percentage-change formula gives different answers depending on which point you start from. Going from $10 → $12 is a 20% price hike; going from $12 → $10 is a 16.7% cut. The midpoint (arc) method — introduced by Ragnar Frisch in the 1930s — divides changes by the average of the two values instead of the base. That gives you one symmetric number regardless of direction, which is why it's the default in most intro textbooks (Mankiw, Krugman, McConnell).
The result is technically the arc elasticity — the elasticity across a segment of the demand curve, not at a single point. For small changes it converges to the point elasticity dQ/dP · P/Q; for large changes it's a better summary of the average responsiveness over the interval.
By convention we report elasticity as a negative number (price and quantity move opposite ways under normal demand). Many textbooks and news reports drop the sign and use the absolute value — the classification (elastic vs inelastic) is the same either way.