Price Elasticity of Demand

Adjust the sliders to explore how changes in price affect quantity demanded — and what that means for revenue.

Formula PED = % change in quantity demanded ÷ % change in price
Inputs
+10%
-25%
PED value
-2.50
|PED| (absolute)
2.50
Revenue effect
Falls
Demand curve (indexed, base = 100)
Try a real-world example
Key concepts

Elastic demand (|PED| > 1)

Demand changes more than proportionally. Common with luxury goods, goods with many substitutes. Raising price reduces total revenue.

Inelastic demand (|PED| < 1)

Demand barely responds to price. Common with necessities, addictive goods, no substitutes. Raising price increases total revenue.

Unit elastic (|PED| = 1)

Quantity falls in exact proportion to price rise. Total revenue stays the same regardless of price change.

Factors affecting PED

Number of substitutes · necessity vs luxury · proportion of income · time period · brand loyalty · habit/addiction