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Business Definition for: price sensitive
Dictionary of Marketing Terms
price sensitive

tendency of the demand for a product or service to vary according to variations in price. Some goods are more price sensitive than others, depending upon other factors that impact demand, such as need for the products (medicine vs. cosmetics), the availability of substitutes (salt vs. bread), and the relative size of the variation in price. Marketers of price-sensitive goods should test new prices before implementing them, to evaluate the impact on demand.

See also elasticity
Related Terms:
elasticity

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.

Referring Terms:
inelastic demand
Copyright c 2000, 1994, 1987 by Barron's Educational Series, Inc. Reprinted by arrangement with Publisher.
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