This tool calculates price elasticity of demand (PED) or supply (PES) from two points and shows where every percentage came from. It is built around one habit: name the base before you divide.
Use it after you have tried a question by hand. Compare your working with the trace, line by line.
How do you use it?
- Choose the measure: PED or PES.
- Choose the method: initial-base (percentage change from the starting value) or midpoint (the average of start and end is the base).
- Enter four numbers: price before, price after, quantity before, quantity after. The tool starts with price 10 to 12 and quantity 100 to 80.
- Tick Also show the other method for comparison if you want to see how much the method matters.
- Press Show the working. Reset puts the starting values back.
How do you read the result?
The calculation trace has a line for the quantity change and a line for the price change. Each line shows the base it divided by and labels it “the initial (before) value” or “the midpoint”. Then it divides one percentage by the other.
Below that you get three checks. Sign tells you whether the direction is what the law of demand or supply would predict. Magnitude says elastic (size above 1), inelastic (below 1) or unit elastic (exactly 1). For PED, a revenue line compares price × quantity before and after.
Example walk-through
Take the starting values: price 10 to 12, quantity 100 to 80, initial-base PED.
- Quantity: change is −20, base is 100, so −20 ÷ 100 × 100 = −20%.
- Price: change is +2, base is 10, so 2 ÷ 10 × 100 = 20%.
- PED = −20 ÷ 20 = −1. The size is exactly 1, so the tool says unit elastic.
Now look at revenue. It was 10 × 100 = 1000 and becomes 12 × 80 = 960, so it fell. A reader expecting “unit elastic means revenue unchanged” is surprised here.
Tick the comparison box. The midpoint bases are 90 for quantity and 11 for price. That gives −22.2222% and 18.1818%, so PED is about −1.2222. The size is above 1, so demand is elastic, and a fall in revenue now fits.
The lesson: over a large change, the method decides the verdict. That is why the question must say which method to use, and why your answer must say which one you used.
What are the assumptions and limits?
- It is an arc measure from two points, not the slope at a single point.
- It does not switch methods silently. You only see the other method when you ask.
- The base for a percentage cannot be zero. If it is, the tool says the percentage change is undefined.
- If the price does not change, PED or PES is undefined because you would divide by zero.
- The revenue line assumes price × quantity is revenue, with nothing else changing.
- It is a practice aid, not an official marking tool. Check the current Cambridge syllabus for the method and sign convention your course expects.
Which lessons explain the result?
Start with calculating percentage changes from the specified base, then interpreting an elasticity value and its sign. The revenue line is explained in connecting price elasticity with revenue under assumptions. For the trap the tool warns about, read avoiding comparisons of elasticities from incompatible methods.
The wider habit is in selecting an appropriate percentage base. When you want mixed questions, try the elasticity practice set, and see the full elasticity module for the route.
If you keep losing marks on bases and signs, online one-to-one Economics tuition lets a teacher check your own working. More tools are in the learning tools directory.