What Is Price Elasticity of Demand?
Price Elasticity of Demand (PED) measures how much the quantity demanded of a product changes in response to a change in its price. It helps businesses understand whether raising or lowering prices will increase or decrease total revenue.
The Midpoint (Arc Elasticity) Formula
This calculator uses the midpoint method: PED = [(Q2 − Q1) / ((Q1 + Q2)/2)] ÷ [(P2 − P1) / ((P1 + P2)/2)]. This method gives the same result whether price rises or falls, unlike simpler point-elasticity formulas.
- |PED| > 1 means demand is elastic (quantity is highly sensitive to price).
- |PED| < 1 means demand is inelastic (quantity changes proportionally less than price).
For general business and educational planning purposes only.
Last reviewed August 2026