Q: Should I raise or lower my price based on elasticity?

If demand is inelastic (PED 1), lowering prices increases revenue because the volume gain is large. But always check total profit, not just revenue — this calculator shows both.

Question 1

What is price elasticity of demand?

Accepted Answer

Price elasticity of demand (PED) measures how sensitive customer demand is to price changes. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. A PED greater than 1 means demand is elastic (price-sensitive), while less than 1 means inelastic (price-insensitive).

Question 2

How do you calculate price elasticity?

Accepted Answer

This calculator uses the midpoint method: PED = (% Change in Quantity) ÷ (% Change in Price), where each percentage change uses the average of the old and new values as the base. This gives a consistent result regardless of direction (price increase vs. decrease).

Question 3

What is elastic vs. inelastic demand?

Accepted Answer

Elastic demand (PED > 1) means customers are very price-sensitive — a 10% price increase causes more than 10% drop in sales. Inelastic demand (PED < 1) means customers are less sensitive — a 10% price increase causes less than 10% drop in sales. Luxury goods and commodities tend to be elastic; essentials and unique products tend to be inelastic.

Question 4

Should I raise or lower my price based on elasticity?

Accepted Answer

If demand is inelastic (PED < 1), raising prices increases total revenue because the volume drop is small. If demand is elastic (PED > 1), lowering prices increases revenue because the volume gain is large. But always check total profit, not just revenue — this calculator shows both.

Question 5

How do I find my product's price elasticity on Shopify?

Accepted Answer

Run a price test: change the price for 2-4 weeks and compare units sold before and after. Use Shopify Analytics to pull the sales data, then enter both data points into this calculator. For more accuracy, test one product at a time and keep marketing spend consistent during the test period.

Free Price Elasticity Calculator for Shopify

Related Tools

Profit Margin Calculator

Break-Even Calculator

Discount Price Calculator

Bundle Pricing Calculator