Price Elasticity
A measure of how sensitive consumer demand for a product is to a change in its price, expressed as a ratio.
Full Definition
Price elasticity of demand in retail analytics quantifies the percentage change in sales volume resulting from a 1% change in price. A product with high price elasticity (absolute value greater than 1) is considered price-sensitive, meaning small price increases lead to significant volume declines. Inelastic products (absolute value less than 1) show relatively stable demand despite price changes. Retailers use price elasticity models to optimise everyday pricing, promotional depth, and markdown strategy. Editors should write 'price elasticity' (two words, unhyphenated) as the standard noun form; 'price-elastic' is the correct hyphenated adjective.
Usage
Usage note: Always write 'price elasticity of demand' in full on first use in formal documents. The abbreviated 'price elasticity' is acceptable thereafter. Do not confuse with 'cross-price elasticity,' which measures the effect of one product's price on another's demand.
In Context
- "The pricing analytics team calculated price elasticity coefficients for each category to inform the annual price review." — Pricing strategy report
- "Staple grocery items typically show low price elasticity, making deep discounting less effective than in discretionary categories." — Category management white paper