Which of these best describes the concept of price elasticity?

The concept of price elasticity primarily focuses on how the quantity demanded of a good or service changes in response to a change in its price. Essentially, it measures the relative responsiveness of consumers to price variations, indicating whether demand is elastic (sensitive to price changes) or inelastic (less sensitive to price changes). When price elasticity is high, even a small change in price can lead to a significant change in demand; conversely, when price elasticity is low, demand remains relatively stable despite changes in price.

Understanding price elasticity is crucial for businesses as it impacts pricing strategies, revenue forecasts, and market positioning. Companies can use this concept to determine how to adjust prices without substantially affecting sales volume or to identify products that may benefit from price changes to increase profitability.