Definition:
Price elasticity of demand measures how sensitive customer demand is to changes in price.
dynamicpricing.local/ 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.