What is price elasticity and why is it important?
An example of an AI chatbot conversation about price elasticity and its significance in economics.
Can you explain what price elasticity is?
Price elasticity measures how much the quantity demanded of a good changes when its price changes. It's a key concept in economics.
Why is understanding price elasticity important for businesses?
Understanding price elasticity helps businesses set prices effectively, forecast sales, and make informed decisions about production and marketing.
What factors affect price elasticity?
Factors include the availability of substitutes, necessity vs luxury status, and the proportion of income spent on the good.
Can you give an example of a product with high price elasticity?
Sure! Luxury items like designer handbags often have high price elasticity because consumers can easily forgo them if prices rise.
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