What is price elasticity and how does it affect revenue?
An example of an AI chatbot conversation about price elasticity and its impact on revenue.
What is price elasticity and how does it affect revenue?
Price elasticity measures how demand changes with price changes. If demand is elastic, a price drop increases revenue.
Can you give me an example of elastic and inelastic demand?
Sure! Luxury goods often have elastic demand; a price increase can lead to a significant drop in sales. Necessities, like bread, are usually inelastic.
How can businesses use this information to set prices?
Businesses can analyze elasticity to optimize pricing strategies, ensuring they maximize revenue based on consumer response.
What factors influence price elasticity?
Factors include the availability of substitutes, necessity vs. luxury status, and consumer income levels.
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