Then unit sales drop is 0.2.
In business economics, price elasticity refers to how much an individual, consumer, or producer changes demand or supply in response to changes in price or income. It is primarily used to assess changes in consumer demand due to price changes for goods and services.
A good is said to be price elastic if an increase in price leads to a large decrease in demand. For example, if price increases by 20% and demand decreases by 50%, PED = -2.5. Example: Heinz Soup. Today, there are many alternatives to Heinz soup.
A way to calculate price elasticity is to divide the change in demand (or supply) by the change in price. This will tell you which bucket the product falls into. A value of 1 means that the product is unit elastic and changes in price reflect equal changes in supply and demand.
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