Price elasticity
How strongly demand responds to a price change: the percent change in units sold for each percent change in price.
Also called price elasticity of demand
An elasticity of −2 means a 10% price increase cuts units sold by about 20%. Demand is called elastic below −1 and inelastic between −1 and 0.
It differs by product, shopper and season, and estimates from other stores rarely transfer. A price test measures it for your products, over the prices you test.
A 10% price increase that lowers units sold by 5% suggests an elasticity of about −0.5: revenue goes up, and at most margins profit does too.
Related terms
- Price testA test where different groups of shoppers see and pay different prices for the same product, to find the price that earns the most.
- Break-even analysisWorking out how many more or fewer orders a price, discount or shipping change needs to keep gross profit where it is, before you test it.
- Profit per visitorGross profit from orders divided by visitors: revenue minus product costs and other variable costs, per visitor in a variant.