Pricing
The revenue test
Whatever elasticity says, revenue tells you whether the move paid.
The Formula
Revenue change = (P2 x Q2) / (P1 x Q1) - 1
Whatever elasticity says, revenue tells you whether the move paid.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| R1 | Revenue before | currency | Price times quantity before the change. |
| R2 | Revenue after | currency | Price times quantity after the change. |
What Each Symbol Means
R1currency
Revenue before
Price times quantity before the change.
R2currency
Revenue after
Price times quantity after the change.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to calculate price elasticity of demand page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Calculate Price Elasticity Of Demand, filed under Business. Every number the guide produces comes from substituting into this one line.