What inputs does the Price Elasticity Calculator need?

It takes 4 inputs: current_price, new_price, current_demand, new_demand. Outputs returned: priceChangePct, demandChangePct, elasticity, elasticityType, currentRevenue / newRevenue / revenueDelta / revenueDeltaPct, recommendation.

Can I verify the Price Elasticity Calculator with a worked example?

Yes. With current_price = $20, new_price = $25, current_demand = 100, new_demand = 80. the tool returns priceChangePct = 25, demandChangePct = -20, elasticity = -0.8 (Inelastic); revenue unchanged at $2,000.

Where does the Price Elasticity Calculator get its benchmark data?

Reference data is sourced from: Varian, Intermediate Microeconomics — 9th ed. (chapter on elasticity) (as of 2019).

What can the Price Elasticity Calculator not tell me?

Known limitations: Two points describe a chord, not a curve. Estimated elasticity is valid only near the price band sampled. Cannot detect menu effects, anchoring, or promotion-driven demand spikes.

Methodology: Price Elasticity Calculator

1. Scope

Applies the simple percent-change (point) elasticity formula to two (price, demand) points and reports whether revenue grows or shrinks under the observed elasticity. It does not use the midpoint/arc formula, estimate elasticity from a single data point, or model cross-elasticity between products.

2. Inputs and outputs

Inputs

current_price number (currency)
new_price number (currency)
current_demand number
new_demand number

Outputs

priceChangePct

(new_price − current_price) / current_price × 100.
demandChangePct

(new_demand − current_demand) / current_demand × 100.
elasticity

demandChangePct / priceChangePct (point elasticity of demand).
elasticityType

Perfectly Inelastic / Inelastic (|e| < 1) / Unit Elastic (=1) / Elastic (|e| > 1) / Perfectly Elastic.
currentRevenue / newRevenue / revenueDelta / revenueDeltaPct

price × demand at each point, and the change between them.
recommendation

Plain-language read of the elasticity and the revenue direction.

Engine source: src/lib/price-elasticity-calculator/engine.ts

3. Formula / scoring logic

price_change_pct  = (new_price - current_price) / current_price * 100
demand_change_pct = (new_demand - current_demand) / current_demand * 100
elasticity        = demand_change_pct / price_change_pct

4. Assumptions

Two observed points approximate local elasticity with a simple percent change (not the midpoint average). For policy decisions, estimate from a regression across many points.
Demand is stationary between the two measurements — no seasonality, no macro shock, no competitor price move.

5. Data sources

Varian, Intermediate Microeconomics — 9th ed. (chapter on elasticity) as of 2019

6. Known limitations

Two points describe a chord, not a curve. Estimated elasticity is valid only near the price band sampled.
Cannot detect menu effects, anchoring, or promotion-driven demand spikes.

7. Reproducibility

Input
current_price = $20, new_price = $25, current_demand = 100, new_demand = 80.

Expected output
priceChangePct = 25, demandChangePct = -20, elasticity = -0.8 (Inelastic); revenue unchanged at $2,000.

8. Change log

2026-04-24 methodology page first published.

Worked example

Run live against the same engine this site ships (/engines/price-elasticity-calculator.js). The inputs and outputs below are recomputed on every build and independently re-verified in CI — they are never hand-authored.

Input

tool: price_elasticity
current_price: 100
new_price: 110
current_demand: 1000
new_demand: 920

Output

priceChangePct: 10
demandChangePct: -8
elasticity: -0.8
elasticityType: Inelastic
currentRevenue: 100000
newRevenue: 101200
revenueDelta: 1200
revenueDeltaPct: 1.2
recommendation: Demand is inelastic — buyers are relatively insensitive to this price increase. Revenue improves, making this a strong pricing lever.

Frequently asked questions

What does the Price Elasticity Calculator calculate?: Applies the simple percent-change (point) elasticity formula to two (price, demand) points and reports whether revenue grows or shrinks under the observed elasticity. It does not use the midpoint/arc formula, estimate elasticity from a single data point, or model cross-elasticity between products.
What inputs does the Price Elasticity Calculator need?: It takes 4 inputs: current_price, new_price, current_demand, new_demand. Outputs returned: priceChangePct, demandChangePct, elasticity, elasticityType, currentRevenue / newRevenue / revenueDelta / revenueDeltaPct, recommendation.
What formula does the Price Elasticity Calculator use?: The exact computation is: price_change_pct = (new_price - current_price) / current_price * 100; demand_change_pct = (new_demand - current_demand) / current_demand * 100; elasticity = demand_change_pct / price_change_pct
Can I verify the Price Elasticity Calculator with a worked example?: Yes. With current_price = $20, new_price = $25, current_demand = 100, new_demand = 80. the tool returns priceChangePct = 25, demandChangePct = -20, elasticity = -0.8 (Inelastic); revenue unchanged at $2,000.
Where does the Price Elasticity Calculator get its benchmark data?: Reference data is sourced from: Varian, Intermediate Microeconomics — 9th ed. (chapter on elasticity) (as of 2019).
What can the Price Elasticity Calculator not tell me?: Known limitations: Two points describe a chord, not a curve. Estimated elasticity is valid only near the price band sampled. Cannot detect menu effects, anchoring, or promotion-driven demand spikes.