Business Glossary

degree to which supply or demand for a product or service will change as a result of a change in price. A price elasticity of 1.0, as demonstrated by actual sales history, means that demand (or sales) rises or falls in exact proportion to a decrease or increase in price. For example, if the price goes up 10%, sales go down 10%. Nonluxury items or services, such as emergency surgery in the extreme, have very little elasticity, because people will buy or pay for them regardless of cost.