A/B Price Test Sample Size Calculator
Calculate the minimum sample size needed for a statistically significant A/B price test. Set confidence level, power, and minimum detectable effect.
Price Elasticity of Demand Calculator
Calculate price elasticity of demand (PED) using the midpoint method. Determine if your product is elastic or inelastic and see how price changes affect revenue, quantity sold, and total profit.
Scenario A (Original)
$
Scenario B (Changed)
$
For profit analysis
$
PED = -1 — Unit Elastic
You're near the revenue-maximizing price. Small adjustments have minimal revenue impact.
Price Elasticity⧉
-1
|PED| = 1
% Δ Quantity⧉
-22.22%
1,000.00 → 800.00
% Δ Price⧉
+22.22%
$20.00 → $25.00
Revenue Impact⧉
+$0.00
$20,000.00 → $20,000.00 (+0%)
Profit Impact⧉
+$2,000.00
$10,000.00 → $12,000.00 (+20%)
Revenue Simulation (Using Computed Elasticity)
| Price Change | Price | Est. Quantity | Revenue | Profit | vs Original |
|---|---|---|---|---|---|
| -30% | $14.00 | 1,300 | $18,200.00 | $5,200.00 | -$1,800.00 |
| -20% | $16.00 | 1,200 | $19,200.00 | $7,200.00 | -$800.00 |
| -10% | $18.00 | 1,100 | $19,800.00 | $8,800.00 | -$200.00 |
| -5% | $19.00 | 1,050 | $19,950.00 | $9,450.00 | -$50.00 |
| +0% | $20.00 | 1,000 | $20,000.00 | $10,000.00 | — |
| +5% | $21.00 | 950 | $19,950.00 | $10,450.00 | -$50.00 |
| +10% | $22.00 | 900 | $19,800.00 | $10,800.00 | -$200.00 |
| +15% | $23.00 | 850 | $19,550.00 | $11,050.00 | -$450.00 |
| +20% | $24.00 | 800 | $19,200.00 | $11,200.00 | -$800.00 |
| +30% | $26.00 | 700 | $18,200.00 | $11,200.00 | -$1,800.00 |
Planning notes, formulas, and examples
About the Price Elasticity of Demand Calculator
Price elasticity of demand (PED) measures how sensitive customer demand is to price changes. If a 10% price increase causes a 20% sales drop, your PED is −2.0, meaning demand is highly elastic. If the same increase only causes a 2% drop, PED is −0.2 — demand is inelastic, and the price increase boosts total revenue.
Understanding PED is critical for pricing strategy. This calculator uses the midpoint (arc elasticity) method to compute PED from two price-quantity pairs. It classifies your demand as elastic, inelastic, or unit elastic, then shows the revenue and profit impact so you can make informed pricing decisions.
Use the result to compare scenarios, test assumptions, and revisit the model when pricing, volume, or financing inputs change.
From solo freelancers to mid-market companies, having reliable price elasticity of demand data supports stronger negotiations, tighter forecasting, and more confident strategic planning. Modify the inputs above to match your current business conditions and re-run the numbers as often as your market shifts.
From solo freelancers to mid-market companies, having reliable price elasticity of demand data supports stronger negotiations, tighter forecasting, and more confident strategic planning. Modify the inputs above to match your current business conditions and re-run the numbers as often as your market shifts.
When This Page Helps
Guessing at price changes is risky. This calculator quantifies how customers will respond so you can predict whether a price increase will boost or hurt total revenue. It's the foundation of data-driven pricing and revenue optimization. Instant recalculation lets you test different assumptions side by side, giving you the confidence to act on data rather than gut instinct.
How to Use the Inputs
- Enter the original price and quantity sold at that price.
- Enter the new (proposed) price and expected quantity at that price.
- Optionally enter your unit cost for profit analysis.
- View the PED value and its classification (elastic, inelastic, unit elastic).
- Compare total revenue and profit before and after the price change.
- Experiment with different price points to find the revenue-maximizing price.
Formula used
PED = (%Δ Quantity) / (%Δ Price) using the midpoint method. %Δ Quantity = (Q2 − Q1) / ((Q1 + Q2) / 2) × 100. %Δ Price = (P2 − P1) / ((P1 + P2) / 2) × 100. |PED| > 1 = elastic, |PED| < 1 = inelastic, |PED| = 1 = unit elastic.Example Calculation
Result: PED = −0.90 (inelastic)
%ΔQ = (800 − 1000) / 900 × 100 = −22.2%. %ΔP = (25 − 20) / 22.5 × 100 = +22.2%. PED = −22.2% / 22.2% = −1.0. With |PED| = 1.0 (approximately unit elastic), revenue stays roughly constant. At $20 × 1,000 = $20,000 vs $25 × 800 = $20,000. The price increase is neutral for revenue but profitable if margins matter.
Tips & Best Practices
- PED is always negative (price up → demand down), but often reported as absolute value.
- Necessities (gas, medicine) tend to be inelastic; luxuries tend to be elastic.
- Products with many substitutes are more elastic.
- Short-term elasticity differs from long-term — customers adjust behavior over time.
- If |PED| > 1, lower the price to increase revenue. If < 1, raise the price.
- Collect real sales data at multiple price points for accurate elasticity estimation.
Interpreting the Elasticity Coefficient
The magnitude of PED tells you the degree of sensitivity. |PED| between 0 and 0.5 is highly inelastic (gasoline, insulin). 0.5 to 1.0 is moderately inelastic (utilities, basic food). 1.0 to 2.0 is moderately elastic (restaurants, entertainment). Above 2.0 is highly elastic (specific brand of commodity). Each range implies a different pricing strategy.
From Elasticity to Pricing Action
For inelastic products, raise prices incrementally and reinvest the extra margin into product improvement or marketing. For elastic products, compete on value — lower prices to capture volume, or differentiate to shift the demand curve and make it more inelastic.
Sources & Methodology
Last updated:
Frequently Asked Questions
Elastic demand (|PED| > 1) means customers are price-sensitive — small price increases cause large demand drops. Inelastic demand (|PED| < 1) means customers are relatively insensitive to price. Revenue increases with price hikes when demand is inelastic.
The midpoint (arc) method gives the same elasticity regardless of whether you go from A to B or B to A. Simple percentage change gives different results depending on direction, which is misleading. The midpoint method averages the starting and ending values as the base.
Options include: running a price test (raise or lower price temporarily and measure sales), analyzing historical data across price changes, surveying customers on willingness to pay, or using industry benchmarks. The more data points you have, the more reliable the estimate.
Yes, absolutely. Elasticity changes with competition (more substitutes = more elastic), customer habits (addiction = inelastic), economic conditions (recession = more elastic for luxuries), and product lifecycle (new = inelastic, mature = elastic). Recalculate at least annually.
Unit elastic demand has |PED| = 1. This means the percentage change in quantity exactly equals the percentage change in price. Total revenue stays the same regardless of price. This is the revenue-maximizing point on the demand curve.
The optimal price maximizes total revenue (or profit). If |PED| > 1, you're above the optimal price — lower it. If |PED| < 1, you're below — raise it. Price where |PED| ≈ 1 to maximize revenue. For profit maximization, you need to factor in marginal cost as well.
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