Price Elasticity of Demand

How responsive is quantity to a price change? Elasticity determines whether raising prices helps or hurts revenue — critical for corporate strategy and public policy.

economicselasticitypricingdemandrevenue

Live Result

-2

ƒ: pct_change_quantity / pct_change_priceraw: -2.00000

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

pct_change_quantity

% change in quantity demanded (negative if price rises)

pct_change_quantity = -10

pct_change_price

% change in price (positive if rising)

pct_change_price = 5

old_qty

Quantity before price change

old_qty = 1000

new_qty

Quantity after price change

new_qty = 900

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.

📖

Learn: Price Elasticity of Demand

PART VIII — ECONOMICS · Educational Guide

The Core Idea

When Netflix raised its subscription price 10%, how many subscribers did it lose? When corn prices fell 20%, did farmers plant more or less the following year? The answer lies in price elasticity of demand — the ratio of the % quantity change to the % price change.

How It Works

PED = % Change in Quantity Demanded ÷ % Change in Price. |PED| > 1 = elastic (quantity very responsive — think luxury goods, Netflix). |PED| < 1 = inelastic (quantity barely moves — think insulin, gasoline, food staples). |PED| = 1 = unit elastic. Revenue rule: raising price increases revenue if demand is inelastic; reduces revenue if elastic. Corn is inelastic in aggregate (food staple) — a drought that cuts supply raises both price and farmer revenue.

💡

Real-World Example: Price rises 5%, quantity falls 10% → PED = −10/5 = −2.0 (elastic). A company that raises price 10% with elastic demand (PED = −2) will see quantity fall 20%. Revenue = Price × Quantity: $10 × 1,000 = $10,000 → $11 × 800 = $8,800. Revenue FALLS. For inelastic PED = −0.4: same 10% price rise cuts quantity only 4%. Revenue $10,000 → $11 × 960 = $10,560. Revenue RISES.

Price Elasticity of Demand

Connected Topics