Definition:
Price elasticity of demand measures how sensitive customer demand is to changes in price.
DynamicPricing.ai analyzes historical sales data and market behavior to estimate elasticity and adjust prices accordingly—raising prices when demand is stable and lowering them when demand is sensitive.
Elasticity Types:
- Elastic demand (price‑sensitive)
- Inelastic demand (price‑insensitive)
Example:
A retailer selling phone accessories raises the price of a charger from $19 to $22 and notices a noticeable drop in purchases. The strong demand reaction indicates high price elasticity of demand, suggesting the product is very price-sensitive.