Price elasticity theory

Price elasticity theory measures how changes in the price of a product affect the quantity of that product consumers are willing to buy. If a small price change leads to a large change in sales, the product is considered "elastic." Conversely, if sales hardly change with price fluctuations, it is "inelastic." This concept helps businesses and governments understand consumer behavior, adjust pricing strategies, and predict how changes in taxes or prices might impact overall demand for goods and services.