The Price Elasticity of Demand (PED) Calculator determines how sensitive the demand for a good is to changes in its price. It uses the Midpoint Formula, which is preferred by economists because it gives the same elasticity value regardless of whether the price rises or falls.
Interpreting the Results
- Elastic (PED > 1): Demand is sensitive to price. A small price change leads to a large change in quantity demanded. Price increases typically lower total revenue.
- Inelastic (PED < 1): Demand is not very sensitive to price. Price increases typically raise total revenue.
- Unit Elastic (PED = 1): Theoretical state where price and quantity changes balance out exactly. Revenue remains constant.