Interactive simulator
Price Elasticity of Demand Simulator
Price elasticity of demand measures how much quantity demanded responds to a price change. This simulator uses the midpoint (arc) formula: E = ((Q2-Q1)/((Q1+Q2)/2)) / ((P2-P1)/((P1+P2)/2)). Enter two prices and the quantities sold at each — for example, P = 10 to 8 with Q = 100 to 140 gives E = -1.5, elastic demand. The tool classifies demand as elastic, inelastic, or unit-elastic and shows how total revenue moves.
Price Elasticity of Demand
Midpoint (arc) formula
- Average quantity: (Q₁ + Q₂) ÷ 2 = (100.00 + 140.00) ÷ 2 = 120.00
- %ΔQ = (Q₂ − Q₁) ÷ avg Q = 40.00 ÷ 120.00 = 0.3333 (33.33%)
- Average price: (P₁ + P₂) ÷ 2 = (10.00 + 8.00) ÷ 2 = 9.00
- %ΔP = (P₂ − P₁) ÷ avg P = -2.00 ÷ 9.00 = -0.2222 (-22.22%)
- E = %ΔQ ÷ %ΔP = 0.3333 ÷ -0.2222 = -1.500
- Classification by |E| = 1.500: elastic — quantity responds more than proportionally to price.
Using averages as the base removes the direction problem: going from P₁ to P₂ gives the same magnitude as going from P₂ to P₁. The negative sign just reflects the law of demand — classification uses the absolute value.
How to use it
Enter the original price and quantity.
Enter the new price and quantity.
Read the computed elasticity and its classification.
Compare total revenue before and after the change.
What you will learn
- Compute elasticity using the midpoint formula.
- Classify demand as elastic, inelastic, or unit-elastic.
- Connect elasticity to total-revenue changes.
Model notes
The midpoint formula gives one elasticity value between two points; it is not the point elasticity at either price. The tool assumes the observed changes are caused only by price, holding all else constant. No real market data is included.