Price elasticity

Price elasticity is that magical economic tool that tells you how likely people are to freak out and stop buying your product when you decide to jack up the prices. Imagine it as the marketing version of playing chicken with your customers' wallets: the more elastic, the more they'll bail at even the slightest price hike. So, unless you're selling air to a fish, you might want to keep an eye on it!

Price elasticity of demand is a measure used in economics to quantify how the quantity demanded of a good or service changes in response to a change in its price. It is calculated by taking the percentage change in quantity demanded and dividing it by the percentage change in price. A product is considered price elastic if a small change in price leads to a significant change in quantity demanded, indicating that consumers are sensitive to price changes; conversely, a product is inelastic if a change in price has little impact on the quantity demanded. Understanding price elasticity helps businesses and policymakers make informed decisions regarding pricing strategies, tax policies, and market forecasting.