How does price elasticity affect demand?
An example of an AI chatbot conversation about price elasticity and its impact on demand.
Can you explain how price elasticity affects demand?
Sure! Price elasticity of demand measures how much the quantity demanded of a good responds to a change in its price.
What happens when a product is elastic?
When a product is elastic, a small change in price leads to a significant change in the quantity demanded.
Can you give me an example of an elastic product?
Absolutely! Luxury items like designer handbags are often elastic; if their prices rise, many consumers will buy less.
And what about inelastic products?
Inelastic products, like essential medications, see little change in demand even if prices increase.
How can businesses use this information?
Businesses can adjust pricing strategies based on elasticity to maximize revenue and optimize sales.
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