Price Change Impact Calculator
Forecast the financial outcome of raising or lowering prices. Uses price elasticity to predict volume changes and their net effect on profit.
Current State
Simulation
Financial Projection
The Profit Verdict
Red Light: Strategy Destroys Value
Volume Impact
We predict a volume change of -15.0%. Make sure operations can handle this (if positive) or that you are okay losing these customers (if negative).
Revenue vs Profit
Focus on the Profit bar. Revenue is vanity; Profit is sanity. A strategy that boosts revenue but kills profit is dangerous.
Sensitivity
If elasticity was just slightly different (e.g., -2.0 instead of -1.5), would this still be profitable? Check by adjusting the slider.
Execution Steps
Enter your Current Price, Volume, and Unit Cost.
Set the proposed 'Price Change %' (e.g., +10% for a hike, -10% for a discount).
Estimate 'Price Elasticity' (how sensitive customers are). -1.5 is standard for retail.
Analyze the 'Net Profit Change'. A revenue gain might still result in a profit loss if volume drops too much.
Pro Strategy
- Use this tool to justify price increases to stakeholders. 'We lose 10% volume, but profit goes up $50k.'
- If you are capacity constrained (can't produce more), raising prices is almost always the right move.
- Be careful with negative price changes (discounts). You need a massive volume lift to make up for margin erosion.
Core Concepts
Elasticity Impact
If demand is elastic (<-1), a price increase causes a larger % drop in volume. If inelastic (>-1), the volume drop is smaller than the price hike.
Volume vs Margin
Raising prices usually lowers volume but increases margin per unit. Lowering prices raises volume but squeezes margin. The goal is to maximize total profit dollars.
Breakeven Elasticity
The specific elasticity value where a price change results in exactly $0 profit change.
What is Price Change Impact Calculator?
This model uses the standard Price Elasticity of Demand (PED) formula to project future sales volume. It compares the 'Base Case' (Current) vs 'Projected Case' (New Price) to calculate the net financial impact.
Best For
- • Planning an annual price increase.
- • Evaluating the risk of a deep discount strategy.
- • Stress-testing financial projections.
Limitations
- • Assumes constant elasticity (linear demand curve).
- • Does not account for competitor reaction (e.g., if they match your price).
- • Ignores inventory constraints.
Alternative Methods
Break-Even Analysis
Calculating the volume needed to cover fixed costs.
Van Westendorp
Finding acceptable price ranges through survey data.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Coffee Shop Price Hike
Input costs (beans) rose 20%. Needed to raise prices.
Modeled a 10% price increase with -1.2 elasticity (loyal customers).
Software License Discount
Sales team wanted to offer 20% off to close Q4.
Model showed they needed a 40% volume lift to break even on profit.