Price Elasticity Examples

A price change of 10% drives a demand change of -8%. On the midpoint method that is an elasticity of -0.875: inelastic. Revenue still improves from $100,000 to $101,200, a $1,200 gain.

Because the elasticity is below 1 in absolute size, buyers tolerate the increase and revenue rises. Inelastic demand is a green light to raise price, since the volume you lose is worth less than the margin you gain.

A 25% price rise drops demand 20%. Measured on the midpoint of the two points, elasticity is exactly -1.0, unit elastic, which is why revenue lands flat at $100,000.

The same -0.8 ratio from the starting point hides that this larger move sits at unit elasticity: the volume loss cancels the price gain. Inelastic demand rewards moderate increases; push too far and it stops being inelastic.

A 10% price cut grows demand 15%, a midpoint elasticity of -1.33: elastic. Revenue rises from $100,000 to $103,500, a $3,500 gain.

When elasticity exceeds 1, cutting price wins because demand responds more than proportionally. Elastic products are where discounts and promotions actually grow the top line.

A 10% rise triggers an 18% demand drop, a midpoint elasticity of -2.08: elastic. Revenue falls from $100,000 to $90,200, a $9,800 loss.

The exact same price move that helped in the baseline destroys revenue here. Elasticity, not the price change itself, decides the outcome, so always measure it before touching price.