PRICE ELASTICITY Definition

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PRICE ELASTICITY is the degree to which customers respond to price changes (calculation: % change in quantity divided by % change in price). A value greater than 1 = customers exhibit a good sensitivity to price. A value less than 1 = customers are insensitive to price. Price Elasticity is if a small change in price is accompanied by a large change in quantity demanded, the product is said to be elastic (or responsive to price changes). A product is inelastic if a large change in price is accompanied by a small amount of change in demand.

Learn new Accounting Terms

UNFAVORABLE VARIANCE is the opposite of favorable variance. See FAVORABLE VARIANCE.

COST-PLUS is determining payment based on the actual cost of production or service provisioning plus an agreed-upon fee or rate of profit; for example, a cost-plus government contract.

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