Use consistent percentage changes
For midpoint elasticity, divide each change by the average of its starting and ending values. Divide the quantity percentage change by the price percentage change. Keep unrounded values until the final result.
Interpret the magnitude
For demand, report whether you use the signed coefficient or its absolute magnitude. A magnitude above 1 is elastic, below 1 inelastic, and equal to 1 unit elastic. Elasticity is not the slope of the demand curve.
Example
Invented classroom demand schedule, not real market data or an archive submission.
- Inputs
- Suppose price rises from $10 to $12 and quantity demanded falls from 120 to 100 units. Assume movement along one unchanged demand curve.
- Midpoint changes
- Quantity: -20 / 110 = -18.18%. Price: 2 / 11 = 18.18%, rounded for display.
- Elasticity
- Using unrounded ratios, (-20 / 110) / (2 / 11) = -1. Its magnitude is 1: unit elastic over this interval.
- Revenue check
- Both endpoints yield $1,200: 10 x 120 and 12 x 100. This is revenue, not profit; costs are unspecified.
Review your draft
Check units, denominators and assumptions. Two real-world observations alone do not isolate a price effect if other demand conditions changed.
Further reading: OpenStax: price elasticity and the midpoint method.
Past elasticity requests
Real historical request types, described without student text or files.
- Elasticity coursework request — December 2020
- Elasticity coursework request — July 2020
- Elasticity coursework request — May 2020
- Elasticity coursework request — February 2020
Common questions
Why use the midpoint method?
The average denominator gives the same interval elasticity whichever endpoint you start from.
Does a negative coefficient mean inelastic demand?
No. The sign describes direction. Use the absolute magnitude to classify responsiveness for a downward-sloping demand curve.