Price Elasticity Calculator

For most goods, price and quantity move in opposite directions — a price increase reduces quantity demanded, and a price decrease increases it — so the ratio of their percentage changes comes out negative. This is normal and expected for typical products; economists usually discuss elasticity by its absolute value (ignoring the negative sign) when classifying it as elastic, inelastic, or unitary.

Elastic means the absolute value of elasticity exceeds 1 — quantity demanded changes by a larger percentage than the price did. A 10% price increase that causes a 25% drop in units sold is elastic (elasticity magnitude 2.5), and it's a warning sign for pricing strategy: raising price further will likely reduce total revenue, since the volume lost outweighs the extra margin per unit.

Perfectly Inelastic (elasticity exactly 0 with a real, nonzero price change) means quantity demanded didn't change at all between the two price points you entered — customers bought the identical quantity regardless of the price change, which is rare in practice and typically only holds for necessities with no substitutes over a narrow price range. Ordinary "Inelastic" (elasticity magnitude between 0 and 1) means quantity did respond to price, just proportionally less than the price moved. If instead you entered the SAME price for both fields, that's a different case entirely — see the next question.

Elasticity is quantity change divided by price change, so if you enter the same value for Initial Price and New Price, that division is by zero and the result is mathematically undefined — not zero. This is the opposite end of the scale from "Perfectly Inelastic": there, quantity stayed flat despite a real price change; here, there was no price change to measure a response against at all, even if the quantity you entered did move.

No — it computes point elasticity between exactly the price/initial-quantity and new-price/new-quantity pair you enter, measured against your initial values. A single product's true demand curve can have different elasticity at different price levels, so comparing a different pair of prices for the same product can produce a different elasticity figure than the one shown here — and because this is a point measure rather than a symmetric one, even swapping which observation you label "initial" versus "new" for the same two price points changes the result.