What is price elasticity?

Price elasticity refers to the responsiveness of the quantity demanded of a good or service when there is a change in its price. This economic concept quantifies how sensitive consumers are to price changes, indicating whether the demand for a product is elastic (sensitive to price changes) or inelastic (less sensitive to price changes).

For instance, if a small increase in the price of a product leads to a significant decrease in the quantity demanded, it demonstrates that the product has high price elasticity. Conversely, if demand remains relatively stable despite price increases, the product has low price elasticity. Understanding price elasticity is crucial for marketers as it helps in setting prices that maximize revenue and strategically planning pricing adjustments in response to market changes.

In contrast, the other options pertain to different business concepts—customer satisfaction, pricing strategies for new products, and assessing product quality—which do not directly define or relate to the concept of price elasticity.