What is price elasticity of demand?
An example of an AI chatbot conversation about price elasticity of demand and its implications.
What is price elasticity of demand?
Price elasticity of demand measures how much the quantity demanded of a good changes when its price changes.
Can you give me an example of elastic and inelastic demand?
Sure! Elastic demand means a small price change leads to a large change in quantity demanded, like luxury goods. Inelastic demand means quantity demanded changes little with price changes, like essential medications.
How do businesses use price elasticity in their pricing strategies?
Businesses analyze price elasticity to set prices that maximize revenue. If demand is elastic, lowering prices can increase total revenue.
What factors affect price elasticity?
Factors include the availability of substitutes, necessity vs luxury, and the proportion of income spent on the good.
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