Editing Price elasticity of demand (section)

===Non-constant elasticity and optimal pricing===

If the definition of price elasticity is extended to yield a quadratic relationship between demand units (<math>Q</math>) and price, then it is possible to compute prices that maximize <math>\ln(Q)</math>, <math>Q</math>, and revenue. The fundamental equation for one product becomes

:<math>LQ = K + E_1 \times LP + E_2 \times LP^2 </math>

and the corresponding equation for several products becomes

:<math>LQ_\ell = K_\ell + E1_{\ell,k} \times LP^k + E2_{\ell,k} \times (LP^k)^2</math>

Excel models are available that compute constant elasticity, and use non-constant elasticity to estimate prices that optimize revenue or profit for one product<ref name="Mshtprice1">{{cite web|url=http://templates.modelsheetsoft.com/modelsheettemplates/product-price-elasticity-templates.aspx|title=Pricing Tests and Price Elasticity for one product|access-date=2013-03-03|archive-url=https://web.archive.org/web/20121113100923/http://templates.modelsheetsoft.com/modelsheettemplates/product-price-elasticity-templates.aspx|archive-date=2012-11-13|url-status=dead}}</ref> or several products.<ref name="Mshtprice2">{{cite web|url=http://templates.modelsheetsoft.com/modelsheettemplates/price-elasticity-templates.aspx|title=Pricing Tests and Price Elasticity for several products|access-date=2013-03-03|archive-url=https://web.archive.org/web/20121113101022/http://templates.modelsheetsoft.com/modelsheettemplates/price-elasticity-templates.aspx|archive-date=2012-11-13|url-status=dead}}</ref>