What is price elasticity?
Definition: Price elasticity measures the responsiveness of sales to changes in the price of a product that do not classify as temporary price reductions (Price increases, price decreases lasting longer than 4 weeks and price decreases below 10% lasting up to 4 weeks).
Price elasticity includes the sales history of an item for the latest 52 weeks. There is no lower limit regarding required sales history, but quality control mechanisms make it unlikely to obtain price elasticities with a very short sales history, such as for new product launches.
Context: This coefficient helps predict how sales will react to pricing strategies. A negative elasticity indicates that higher prices lead to lower sales, and vice-versa.
Example: The greater the price elasticity figure (in absolute terms), the more sales respond to a change in price.
An elasticity of -1.7 means that increasing the price by 1% is expected to reduce sales by 1.7%.