Raise the price and lose customers — but do you lose enough to hurt revenue? Elasticity answers it, and reveals why a price cut sometimes helps and sometimes hurts.
Price Elasticity of DemandLive
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Elasticity measures how much quantity demanded responds to price. Where demand is elastic (|E| > 1), a price cut raises total revenue; where it is inelastic, a price cut lowers revenue. On a straight-line demand curve the top half is elastic, the bottom half inelastic, and revenue peaks exactly at the midpoint where elasticity equals one.
Reading this result: You are at the unit-elastic midpoint: revenue is at its maximum, and small price moves in either direction leave it roughly unchanged.
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How it works
Price elasticity is the percentage change in quantity divided by the percentage change in price. Where demand is elastic, cutting price raises total revenue; where inelastic, cutting price lowers it. On a linear demand curve the upper half is elastic and the lower half inelastic, with revenue peaking exactly at the midpoint of unit elasticity.
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The solver uses established numerical methods, but results are for research and educational purposes and should be validated against experiment or professional review before you rely on them.