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Price Sensitivity Definition

price sensitivity – n : economics/marketing term, a.k.a. price sensitivity of demand, or demand
sensitivity; the degree to which unit demand for a business’s products or services (i.e., the market’s desire to buy) falls when prices are raised, or rises when prices are reduced.

Example: a) We’re fortunate that the market for Product A has low price sensitivity: when we raised prices by 20 percent, we sold the same number of units the following quarter. [In this case, the market can also be described as price insensitive; i.e., demand doesn’t change appreciably with a change in price.] b) When we lowered the price of Product B by 5%, we stimulated an immediate 25% increase in unit sales, showing that market to be highly price sensitive.

Adapted from "The CompanyCrafters Entrepreneur's Dictionary"
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