What is Elasticity of Demand in Retail? Explained

Elasticity of demand in retail gauges how consumer demand reacts to changes in product prices. If demand is elastic, a slight price shift results in a significant change in quantity demanded. In contrast, inelastic demand implies that quantity demanded remains relatively stable despite price fluctuations. Retailers use this insight to formulate pricing strategies: elastic demand may prompt competitive pricing, while inelastic demand allows for more flexibility in adjusting prices without a substantial impact on sales. Understanding elasticity is a key tool for retailers aiming to strike a balance between maximizing revenue and meeting consumer expectations.