What is price elasticity and why is it important in global markets?

What is price elasticity and why is it important in global markets?

Price elasticity measures how much the quantity demanded of a good responds to a change in price. It's crucial in global markets as it helps businesses understand consumer behavior and set optimal pricing strategies.

Can you give me an example of a product with high price elasticity?

Sure! A common example is luxury goods, like designer handbags. If their prices increase, consumers may significantly reduce their purchases or switch to alternatives.

How does price elasticity affect international trade?

Price elasticity affects international trade by influencing how countries respond to price changes in imported and exported goods, impacting trade balances.

What factors influence price elasticity?

Factors include the availability of substitutes, the necessity of the product, consumer income levels, and the time frame for adjustment.

How can businesses use price elasticity to their advantage?

Businesses can use price elasticity to optimize pricing strategies, forecast sales, and make informed decisions about product launches and marketing.