Price elasticity is a measure of the sensitivity of demand for a product or service to changes in its price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price. Price elasticity provides insights into how responsive consumers are to price changes. If demand is relatively elastic, a small change in price will result in a proportionately larger change in quantity demanded. Conversely, if demand is relatively inelastic, a change in price will not significantly impact the quantity demanded.
