price elasticity definition

glossary: price elasticity definition

Glossary: price elasticity



Price Elasticity is the measure of how price sensitive demand for a product is. If demand is elastic, unit sales fall sharply as the price of the item is increased, leading to an overall decrease in sales revenue. If demand is inelastic, unit sales may still fall when the price is increased but total sales revenue will rise. Alternatively, in a market where demand is inelastic, a price reduction will not lead to a sharp rise in unit sales and therefore overall profit will be less.

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Definition: price elasticity

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