Pricesensitive

Pricesensitive, often written as price-sensitive or price sensitivity, describes the degree to which consumers or markets respond to changes in price. In economics, it is closely linked to the concept of price elasticity of demand, which measures how the quantity demanded changes in response to price movements.

Price elasticity of demand is expressed as the percentage change in quantity demanded divided by the percentage change in price. If the absolute value of elasticity is greater than one, demand is price-elastic and changes in price lead to proportionally larger changes in quantity demanded. If it is less than one, demand is price-inelastic, and price changes have a smaller effect on quantity sold. Elasticity can vary by product, market, income level, and time horizon.

Determinants of price sensitivity include income, the share of budget spent on the good, availability of substitutes, whether the good is a necessity or a luxury, perceived value, switching costs, and price transparency. Measurement methods range from historical sales analyses and price experiments to surveys and conjoint analysis.

For businesses, price sensitivity informs pricing strategy. Highly price-sensitive segments respond to discounts, promotions, and competitive pricing, while less price-sensitive customers may focus on quality or brand value. Dynamic pricing, price discrimination, and versioning are common responses, though they must balance competitive pressure against margins and ethics.

Examples vary by context: basic commodities and routine purchases often exhibit higher price sensitivity, whereas luxury or highly differentiated products may show lower sensitivity in certain markets. See also price elasticity of demand, consumer behavior, and pricing strategy.