Price elasticity of demand measures the percentage change in quantity sold in response to a 1% change in price. A product with high price elasticity sees large swings in sales volume when prices change; a product with low elasticity (inelastic demand) sells at similar volumes regardless of price changes.
Understanding elasticity helps calibrate how aggressively to reprice. For elastic products, matching or undercutting competitors can meaningfully increase volume. For inelastic products — where customers buy based on brand, necessity, or habit — aggressive price cuts may simply compress margin without lifting volume.