Pricing Elasticity Calculator
Model how price changes affect demand to find your optimal price for maximum revenue or profit.
Current Pricing
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Price Sensitivity Estimates
Estimate demand at a higher and lower price point.
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Optimal Pricing Analysis
Price Elasticity -1.5 Elastic demand
Current Revenue $50,000
Current Profit $25,000
Current Margin 50%
Revenue-Maximizing Price $85
Profit-Maximizing Price $95
Recommendation Consider lowering price
Demand Curve
Price Scenario Analysis
| Price | Est. Volume | Revenue | Gross Profit | Net Profit | vs Current |
|---|
Understanding Price Elasticity
Price Elasticity of Demand
Measures how sensitive demand is to price changes:
Elasticity = % Change in Demand / % Change in Price
- |E| > 1: Elastic - price cuts increase revenue
- |E| < 1: Inelastic - price increases boost revenue
- |E| = 1: Unit elastic - revenue stays constant
Revenue vs Profit Maximization
These often occur at different price points:
- Revenue max: Usually at lower prices (higher volume)
- Profit max: Usually at higher prices (better margins)
Focus on profit unless you're prioritizing market share.
Factors Affecting Elasticity
- Necessity vs luxury: Necessities are less elastic
- Substitutes: More substitutes = more elastic
- Brand loyalty: Strong brands are less elastic
- Time frame: Demand is more elastic long-term
Testing Your Estimates
Your elasticity estimate is only as good as your volume predictions. Test with:
- A/B testing with different prices
- Limited-time promotions
- Geographic price variations
- Historical price change data