Price elasticity calculator: what the price move did to margin
Enter two prices and the units you sold at each. The calculator returns the price elasticity of demand by the midpoint method, then shows what the move did to revenue and, more importantly, to contribution margin. A price change can lose revenue and still earn more margin, and the reverse happens too, so the elasticity number on its own is only half the answer.
Use periods of the same length, such as four weeks either side of the change.
Landed COGS plus shipping, fulfilment and payment fees per unit: every cost that moves with a sale. Held the same at both prices. Build it with the landed cost calculator.
Demand here is inelastic at −0.88. The rise lifted revenue by 1.2% and contribution margin by 15.0%. At the new price, volume could have fallen to 800 units before margin dropped below where it started.
Two points, one ratio, then the margin test
Price elasticity of demand is the percentage change in units sold divided by the percentage change in price. The midpoint method measures both changes against the average of the two points, so you get the same answer whether you read the move forwards or backwards.
The derivation, and why the margin read matters more than the revenue read, is on The Math: price elasticity. Contribution margin here is before marketing, the same rung as CM2 in CM1, CM2 and CM3.
The defaults are demonstrative numbers, not a benchmark. Change a number in the calculator and this example follows.
Elasticity describes the past. Margin decides the next move
The number is only as good as the two points behind it. Before you reprice a range on the strength of one test, check what else changed between them.
Two points are not a demand curve
Elasticity at a 10% rise says little about a 30% rise. Customers who shrug at one step can leave at the next. Test in steps and measure each one.
Other things moved too
Seasonality, ad spend, a stockout or a competitor's sale can all shift units in the same window. If they did, the elasticity reading carries their effect, not just the price.
Revenue is the wrong scoreboard
An elastic reading can still be a good move when the rise adds more margin per unit than the lost units took away. That is why this page scores the move on contribution margin.
Questions operators ask
Because price and units usually move in opposite directions: price up, units down. The minus sign carries that. People often quote the size alone, so an elasticity of 0.88 in conversation normally means −0.88. A positive reading means units rose with price, which usually says something else changed in the same period, such as a promotion, a stock arrival or a seasonal peak.
The midpoint method divides each change by the average of the two values instead of the starting value. With a simple percentage, A$50 to A$55 with units falling from 1,000 to 920 reads as −0.80, while the same move reversed reads as about −0.96. The midpoint method gives −0.88 both ways, so the answer does not depend on which point you call the start.
Yes. Revenue counts the whole price; margin counts only what is left after variable costs. When a rise adds A$5 to a unit that earned A$20 of contribution, each remaining unit earns a quarter more, so volume can fall a long way before total margin drops. The price increase calculator gives that tolerable loss before you move.
There is no good number in the abstract. An inelastic product gives you room to raise prices; an elastic one tells you a cut may win volume. Whether either is worth doing depends on your margin per unit, which is why this calculator reports the margin change beside the elasticity. See price elasticity in the glossary.
Elasticity from your own orders
Two points on a napkin give one reading for one product. Blufire S12 Financial Models runs price elasticity on your own data, and S11 Planning & Forecasting lets you stress-test COGS, AOV or discount moves in the what-if lab, so a reprice is checked against margin before it ships. See Financial Models.