Elasticity calculator
Price elasticity of demand (PED)
Enter both changes
Questions people ask
What is the formula for price elasticity of demand?
PED = percentage change in quantity demanded ÷ percentage change in price. If price rises 10% and quantity demanded falls 5%, PED = −5 ÷ 10 = −0.5: price inelastic.
Why is PED negative?
Price and quantity demanded usually move in opposite directions, so one percentage change is positive and the other negative. Keep the minus sign in your answer; say the size (0.5) when you compare with 1.
How do you tell a luxury from a necessity with YED?
Both are normal goods with positive YED. A necessity has YED between 0 and 1; a luxury has YED above 1. A negative YED means an inferior good.
What does a negative cross elasticity mean?
The goods are complements: when one gets dearer, demand for the other falls, like games consoles and games. A positive XED means substitutes.
When should I use the midpoint method?
When the question asks for it, or when you want the same answer whichever way a large change goes. With a price rise from £4 to £5, the starting-value method gives a 25% change; the midpoint method gives about 22%.
How we work this out
What it does
Price, income and cross elasticity of demand and price elasticity of supply, with the sign, the class and the working.
The four elasticities in A-level Economics: price elasticity of demand (PED), income elasticity of demand (YED), cross elasticity of demand (XED) and price elasticity of supply (PES).
Method
- Each elasticity is the percentage change in quantity divided by the percentage change in its cause: the good's own price for PED and PES, income for YED, and the other good's price for XED.
- From old and new values, the percentage change is (new − old) ÷ old × 100 using the starting value, or (new − old) ÷ the average of old and new × 100 using the midpoint method.
- The sign is kept. PED is normally negative and PES positive; YED is negative for an inferior good; XED is positive for substitutes and negative for complements.
- Size decides the class: below 1 is inelastic (or a necessity for YED), exactly 1 is unit elastic, above 1 is elastic (or a luxury for YED).
- For PED, the calculator works out the revenue change itself (price × quantity before and after). The rule that inelastic demand means a price rise raises revenue holds for small changes.