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Economics
Price Elasticity
How much demand for a product changes when its price goes up or down.
Businesses use elasticity to decide whether they can raise prices without losing too many sales. Essential items (medicine, salt) tend to be inelastic; nice-to-have items (restaurant meals, designer clothes) are more elastic.
Knowing elasticity helps you price products smartly and forecast what will happen when costs rise.
It’s like testing how stretchy a rubber band is — some products snap back hard when you raise the price, others barely move.
Real world: Luxury watches have low price elasticity — raising the price a bit doesn’t scare away many buyers. Petrol has high elasticity — raise the price and people drive less or switch to buses quickly.
💡 Price elasticity tells you whether raising prices will make you richer or send customers running.