Price elasticity

How much volume changes when price changes. A 10% price rise that costs 6% of volume implies an elasticity of minus 0.6.

Inelastic demand, meaning an elasticity between zero and minus one, is where price increases raise revenue. Elastic demand is where they reduce it.

The commercial decision needs the margin as well as the elasticity. At a 35% contribution margin, losing 6% of volume to gain 10% of price is comfortably profitable; at a 5% margin, the same trade is close to neutral.

Elasticity is estimated from history and changes with the competitive situation.