Price elasticity is the sensitivity of consumer demand for a product or service to changes in its price. It measures how much the quantity demanded changes in response to a change in price. If demand is highly responsive to price changes, the product is considered to have elastic demand, meaning a small change in price leads to a significant change in demand.
In contrast, if demand is less responsive to price changes, the product is considered to have inelastic demand, where price changes have a minimal impact on demand.
Understanding price elasticity helps retailers determine optimal pricing strategies, forecast sales, and make informed decisions on pricing adjustments, promotions, and discounts to maximize revenue and profitability.