Price elasticity

Price elasticity is demand's sensitivity to a price change: what percentage of sales you lose per one percent price increase. It is the core number under every pricing decision, because price flows almost one-to-one into margin; a small improvement in realised price usually does more for profit than the same improvement in volume or cost. Elasticity is not a natural constant but an outcome: strong brands, few comparable alternatives and well-chosen price architecture make demand less price-sensitive. Which makes brand building ultimately pricing policy too: it widens the room to raise prices without losing volume.

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