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Price Elasticity Calculator

Pressure-test any FMCG price move in real time. Drag the sliders, watch the volume and gross-profit response, and read the break-even line. The same interactive model the full RGM Academy course uses for lesson 1 — no auth, no paywall.

Updated 23 April 2026Extracted from the Pricing module, lesson 1: Price Elasticity of Demand

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Scenario walkthrough

Tap any section to explore in detail

5.1Scenario setup

The starting SKU, market, and assumptions the model makes.

You're running pricing for CrunchField, a mainstream 300g biscuit SKU. It sits at $4.29 RSP, costs you $2.49 to produce, and moves 2 million units a month — call it ~$103M in annual revenue. Your gross margin is around 41.9%, comfortably inside the healthy mainstream range, and your working elasticity assumption is −1.7 (the CPG working ceiling for established brands with meaningful equity).

A recent input-cost spike has put pressure on next quarter's forecast, and the commercial team is debating whether to take +3%, +5%, or +8% on RSP — or whether to hold price and absorb the margin hit. Finance wants a recommendation by Friday.

Your objective

Use the calculator to find the price move that maximises gross profit given your elasticity, then pressure-test that answer against adverse elasticity and pass-through assumptions before you take the recommendation to Finance.

Key assumptions

The calculator models a single SKU in isolation — no portfolio cannibalisation, no competitive reaction, no distribution changes.
Constant elasticity across the price range (log-linear model); the linear model assumes a constant absolute volume response per absolute price change.
Variable cost is held constant. Fixed costs are excluded — this is a marginal profit calculator, not a P&L.
Pass-through defaults to 100%, meaning the wholesale price move reaches the shelf unchanged. In real trade this is rarely true; the Pass-Through slider lets you test retailer compression scenarios.
Profit break-even formally uses contribution margin (variable cost only), not fully-loaded COGS. This tool treats the $2.49 unit cost as fully variable, so the 41.9% gross margin shown equals contribution margin for BESC purposes — no reconciliation required.

5.2Controls & toggles

Every input the calculator exposes, its range, and what it changes.

Control	Range	Default	What it changes
Price / Price Change	$1.00 – $8.00 (or −50% to +50%)	$4.29 (base RSP)	The shelf price consumers see. Toggle to % mode for small-move sensitivity work; stay in absolute mode when comparing against threshold cliffs ($4.99 → $5.00).
Price Elasticity (ε)	−4.0 to −0.5 in 0.1 steps	−1.7	The volume response per 1% price change. −1.7 is the CPG working ceiling. Drag to −0.8 for locked-in categories, to −2.62 for academic meta-analytic mean, to −3.5 for pure-value soft-drink-class response.
Demand Model	Linear \| Log-Linear	Log-Linear	Log-linear assumes constant PERCENT volume response per percent price change (ε constant across range). Linear assumes constant ABSOLUTE volume response per absolute price change (ε rises as price rises). Log-linear is the standard for CPG.
Break-Even Analysis	Off \| Profit \| Revenue \| Margin %	Off	Overlays the volume (or price) needed to hold revenue, profit, or margin constant after the price move. The fastest way to see which direction a price decision is self-financing.
Pass-Through Rate	20% – 150% in 5% steps	100% (full pass-through)	The share of a wholesale price move that reaches the shelf. Under 100% means retailer compression (they absorb part of the rise to protect their PI). Above 100% means over-pass-through — the retailer raises by more than you did, usually to recover a margin deal.

5.3Step-by-step exploration

8-step guided exploration of the scenario.

Start at the base scenario and read the room
Leave every control at its default. The chart shows the demand curve at ε = −1.7 — the CPG working ceiling for established brands; the dashed blue line marks your current RSP of $4.29 and the 2M-unit volume it clears. The four KPI tiles (Volume, Revenue, Gross Profit, Margin) all show zero delta — this is your calibration point.
Expected outcome: Gross Profit should read about $3.6M per month at 41.9% margin. Remember this number — every subsequent price move is judged against it.
Nudge price up 3% and 5% and watch the profit tiles
Switch the price slider to % mode and try +3%, then +5%. Read the Gross Profit delta. Both moves should LIFT gross profit at ε = −1.7, because the volume you lose (3 × 1.7 = 5.1% and 5 × 1.7 = 8.5% respectively) is less than the margin you gain per unit. But Revenue may already start falling at +5%.
Expected outcome: +3% → roughly +3–4% gross profit. +5% → roughly +5–7% gross profit. Revenue grows on the small move and may start to flatten or dip on the larger one — the classic 'profit beats revenue past unit-elastic' pattern.
Turn on the Profit break-even overlay
Click the Profit break-even button. A red dashed line appears on the chart marking the minimum volume you need to hold constant gross profit at your current price. If your volume is ABOVE that line, the price move is profit-positive; BELOW it, profit-negative.
Expected outcome: At +3%, you're well above the break-even line (~5% margin headroom). At +10%, you're either just above or below depending on elasticity — which is exactly the tension Finance wants quantified.
Stress-test elasticity to −2.62 and −3.5
Keep price at +5% and drag the elasticity slider to −2.62 (the academic meta-analytic mean across 1,851 published estimates). Then to −3.5 (a highly price-sensitive category benchmark, typical of soft drinks and pure-value positions). Watch gross profit.
Expected outcome: At ε = −2.62, a +5% price move still delivers some profit lift (around +1–2%). At ε = −3.5, the same move destroys gross profit outright. This is the stress-test Finance will ask for: 'what if your elasticity assumption is wrong by a standard deviation?'
Add pass-through compression
Reset elasticity to −1.7, keep price at +5%, and drag Pass-Through Rate to 70%. This simulates a retailer absorbing 30% of your wholesale rise to protect their price index. The effective shelf price only rises by 3.5%, so volume loss is smaller — but your wholesale price rose 5%, so your margin per unit still captures the full move.
Expected outcome: Gross profit goes UP compared to the 100% pass-through case, because you take the margin on the full move but only pay the volume cost on the compressed shelf rise. This is why manufacturers often structurally benefit from retailer compression — a counterintuitive result worth knowing.
Test a price cut — walk through all three break-even overlays
Switch pass-through back to 100%, then drag the price to −5%. Click the Revenue break-even button — the red line shows the volume gain needed for revenue to stay flat. Switch to Profit — the red line jumps higher, showing what it takes to hold gross profit. Finally, switch to Margin % — the amber vertical line shows the price *floor* needed to preserve your 41.9% gross margin. Together, the three overlays triangulate the full P&L consequences of any price move.
Expected outcome: At ε = −1.7, a −5% cut delivers roughly +8.5% volume — short of the ~+10.5% needed to break even on revenue, and WAY short of the +14% needed to break even on GROSS PROFIT. The Margin % overlay at default cost shows **$4.29 as the floor** (i.e. cannot cut at all without margin-% erosion) — this overlay's real utility kicks in on the Break-Even tool where unit cost itself changes. Price cuts are almost never self-financing at mainstream elasticity.
Compare Log-Linear vs Linear models at ±10%
Drag price to +10%, then toggle between Log-Linear and Linear demand models. The two curves diverge sharply at the extremes — Linear says you lose less volume on a big price rise, Log-Linear says you lose more.
Expected outcome: Log-Linear is the standard for CPG. Linear can over-optimistically predict big-move outcomes. If your model-chooser flips your recommendation, your real elasticity is probably non-constant and you need a scanner-data calibration, not a sensitivity toggle.
Land on your Friday recommendation
With elasticity pinned at your working assumption, iterate the price slider in 1% steps until gross profit peaks. Note the peak-price and the peak-gross-profit numbers. Then stress-test: hold that peak-price, dial elasticity to −2.62, re-read profit. That's your downside case.
Expected outcome: Your recommendation should be: 'Take +X% on RSP. Expected GP lift +Y%, downside case at ε = −2.62 is +Z%, with a break-even elasticity of W above which the move goes negative.' Four numbers, one sentence, decision-ready.

5.4Reading the output

Every KPI, the formula behind it, and how to interpret a positive or negative value.

KPI	Formula	How to read it
Volume	baseVolume × (newPrice / basePrice)^ε	Units sold per period at the current effective shelf price. Negative delta means the elasticity bit — the key check is whether the delta is smaller in magnitude than your price change × elasticity (it shouldn't be; if it is, pass-through or model selection is distorting the read).
Revenue	price × volume	Peaks at unit-elastic (ε = −1.0). Above that elasticity magnitude, revenue falls with any price rise. Watch the sign and magnitude relative to the Gross Profit delta — the gap between Revenue and Profit peaks is where pricing work earns its keep.
Gross Profit	(price − unitCost) × volume	The number Finance cares about. Peaks at a HIGHER price than revenue does, because margin per unit grows faster than volume falls in the healthy range. A +1% Gross Profit delta on a mid-sized SKU is worth more in absolute currency than most retail-execution levers combined.
Margin %	(price − unitCost) / price	Every percentage point of price flows nearly 1:1 to margin percent when volumes hold. At low base margins (sub-25%), a 1% price move lifts margin % by more than half a point — this is why low-margin businesses have the highest structural price leverage (and highest risk).
Volume Change / Profit Change	Δ vs base scenario	The P&L summary strip below the chart. Green means the price decision is self-financing; red means it cost more in volume than it earned in margin. The Volume Change cell should always move in the opposite direction to Price Change — if it doesn't, something is wrong with the model setup.

The four tiles together tell the margin / volume trade-off in one glance. Read them left-to-right: Volume tells you elasticity's bite, Revenue tells you whether you've crossed unit-elastic, Gross Profit tells you whether the move pays, Margin tells you what it does to the underlying P&L. If Volume is negative and all three of Revenue / Gross Profit / Margin are positive, you're in the healthy sweet spot between the category price and the ε = −1.0 line.

The 1% Price Leverage rule says a 1% price improvement typically delivers around +8.7% operating profit at median CPG margins — the tiles let you verify that leverage in your specific numbers before taking the recommendation to the committee.

5.55 common mistakes to avoid

Diagnostic patterns that catch most misuse of this calculator in practice.

Mistake 1Using category elasticity for a brand decision
Symptom: The +5% move that looked safe at the category ε of −0.9 destroyed brand share and lost 12% volume in the first 8 weeks.
Fix: Brand-level elasticity typically runs **2–3× category elasticity** because the volume loss mostly goes to competitors (the Which-One question), not out of the category entirely (the Will-I question). Drag the elasticity slider from −0.9 to −1.7 or −2.0 before pricing a brand move.
Mistake 2Ignoring pass-through — treating wholesale moves as shelf moves
Symptom: Volume held up better than expected, and you took the win — only to discover 6 months later that the retailer absorbed 40% of your rise and now expects trade compensation.
Fix: Assume **70–90% pass-through** in a compressed-retailer environment unless you have evidence otherwise. The Pass-Through slider lets you test both directions: under-pass (retailer absorbs) and over-pass (retailer raises more than you did to recover a deal).
Mistake 3Optimising for Revenue instead of Gross Profit
Symptom: Volume and Revenue both grew, the price cut 'worked', but Gross Profit fell — finance flags the move 18 months later and the credibility hit lasts longer than the share gain.
Fix: Above ε = −1.0 magnitude, Revenue peaks at a LOWER price than Gross Profit does. Always read the GP delta first, Revenue second. The Revenue break-even overlay is for diagnostic framing, not the decision target.
Mistake 4Assuming elasticity is static across the price range
Symptom: The +3% move at ε = −1.7 delivered as predicted; the +8% move at the same assumed elasticity blew out, with volume down 20% (not 13.6%).
Fix: Elasticity is almost always **ASYMMETRIC** (cuts elicit bigger volume response than rises of equal magnitude) and **NON-LINEAR** (effective elasticity magnitude grows at larger moves). Use the calculator's Linear vs Log-Linear toggle to stress-test both directions; for big moves, always cross-check against scanner-data-derived elasticity at that price point specifically, not the average.
Mistake 5Treating ε as a single number rather than a distribution
Symptom: The deck shows ε = −1.7 and a +5% decision; nobody asks what happens if the true ε is −2.2. Six months later the volume shortfall hits the P&L and the committee demands a post-mortem.
Fix: Always present pricing recommendations with **three elasticity cases**: working assumption (−1.7, CPG working ceiling), meta-analytic mean (−2.62), and a pessimistic tail (−3.5, pure-value/soft-drink-class). Use the elasticity slider to produce the GP outcome under each case. A price recommendation without a downside elasticity case is a half-finished deck.

Related concepts

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This calculator is the sandbox slice of Lesson 1: Price Elasticity of Demand. Each of the other 8 Pricing lessons teaches a complementary concept that sharpens how you read the output above.

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