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Pricing and Retail Definitions for eCommerce

Price elasticity

Category/tag: Pricing

Added 19.09.2022

Price elasticity as a sub-area of price psychology, measures the reaction of demand for a product after a price change. Accordingly, it measures how the quantity demanded behaves when the price of a product increases or decreases by at least one percent, i.e., how do consumers react to minimal or significant changes in price? Elastic demand can be identified if the reaction of customers is high (>1 *). Demand is inelastic if there is very little reaction to a price change (<1 *). If demand does not respond at all (0 *) to price changes, this is called entirely inelastic.

*according to the scale of price elasticity, calculated by this formula.