Price Elasticity Formula Excel Template

Prepared by Dheeraj Vaidya, CFA, FRM

dheeraj@wallstreetmojo.com

visit - www.wallstreetmojo.com
Let us take the example of chocolate ice-cream to understand the concept of price elasticity. If the price of
the ice-cream surged 20% in the last week that resulted in a decline in demand for the same to the tune of
30%. Calculate the price elasticity based on the given information.

Particulars Value
Percentage change in demand -30%
Percentage change in price 20%

Price Elasticity -1.50

Let us take the example of a company which is into the business of soft drinks production. Currently, the company sells its s
drinks at $4.00 per bottle which is drawing weekly demand of 3,000 bottles. Today the management of the company has
decided to cut down the price by $0.50 per bottle which is expected to increase the weekly demand up to 4,000 bottles.
Calculate the price elasticity based on the given information.

Particulars Value
Initial Demand of Bottles (Qi) 3,000
Final demand of Bottles (Qf) 4,000
Initial price per Bottle (Pi) $4.00
Final price per Bottle (Pf) $3.50

Price Elasticity -2.14

ently, the company sells its soft
ment of the company has
mand up to 4,000 bottles.
Let us take the example of the beef sale in the US in the year 2014 to illustrate how price elasticity works in the real world. O
back ongoing food shortage, the prices of cattle surged from $3.47/lb to $4.45/lb. in a span of 10 months. As a result of the
surge, the usual consumption of a family of four reduced from 10.0 lbs to 8.5 lbs. Calculate the price elasticity of the beef de

Particulars Value
Initial Demand (Qi) 10.0
Final demand (Qf) 8.5
Initial price (Pi) $3.47
Final price (Pf) $4.45

Price Elasticity -0.66

works in the real world. On the
onths. As a result of the price
elasticity of the beef demand.