Price elasticity measures how demand or supply responds to price changes, categorizing goods as elastic or inelastic to guide pricing decisions.
Price elasticity is the measure of how responsive demand or supply of a product is to changes in price. It quantifies the relationship between percentage changes in quantity demanded or supplied and percentage changes in price.
Elasticity can be used to categorize goods as elastic or inelastic. Elastic goods show significant changes in quantity demanded or supplied in response to price changes, while inelastic goods exhibit minimal changes in quantity with price variations.
Understanding price elasticity helps businesses make informed pricing decisions and predict consumer behavior based on price fluctuations in the market.
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