Shopify Price Elasticity Calculator

Understanding Price Elasticity for Shopify Stores

Price elasticity of demand measures how sensitive your Shopify customers are to price changes. This powerful metric helps Shopify merchants make informed pricing decisions and predict revenue changes.

Types of Price Elasticity

• Perfectly Inelastic (PED = 0): Demand remains constant regardless of price changes. Common with essential goods like life-saving medications.
• Inelastic (-1 < PED < 0): Demand changes proportionally less than price changes. Typical for necessities like basic food items.
• Unitary Elastic (PED = -1): Demand changes exactly proportionally to price changes. Revenue remains constant.
• Elastic (PED < -1): Demand changes proportionally more than price changes. Common with luxury goods and non-essential items.
• Perfectly Elastic (PED = -∞): Any price increase results in zero demand. Seen in perfectly competitive markets.

How to Use This Calculator

1. Enter your initial product price and quantity sold
2. Input the new price and resulting quantity sold
3. Click "Calculate Elasticity" to see detailed results
4. Analyze the elasticity type and revenue impact

The Midpoint Formula Explained

This calculator uses the midpoint formula for more accurate results:

PED = ((Q₁ - Q₀) / ((Q₁ + Q₀)/2)) / ((P₁ - P₀) / ((P₁ + P₀)/2))

Where:

• P₀ = Initial price of your product
• P₁ = New price after the change
• Q₀ = Initial quantity sold
• Q₁ = New quantity sold after price change

Making Business Decisions with PED

• For elastic products (PED < -1), lowering prices often increases revenue
• For inelastic products (-1 < PED < 0), raising prices often increases revenue
• Consider seasonal changes and market conditions when analyzing results
• Use PED alongside other metrics for comprehensive pricing strategies