How does price elasticity of demand influence consumer behaviour and market dynamic? By six points?

Price elasticity of demand measures how sensitive consumers are to changes in price. If a product has a high price elasticity of demand, it means that consumers are very responsive to changes in price, and small changes in price can lead to large changes in quantity demanded. On the other hand, if a product has a low price elasticity of demand, it means that consumers are not very responsive to changes in price, and changes in price will have little impact on quantity demanded.

This influences consumer behavior in several ways. For products with high price elasticity of demand, consumers are more likely to switch to alternative products if the price of the original product increases. They may also be more likely to wait for sales or discounts before making a purchase. On the other hand, for products with low price elasticity of demand, consumers are less likely to change their purchasing behavior in response to price changes.

In terms of market dynamics, price elasticity of demand can impact competition and pricing strategies. In markets with high price elasticity of demand, companies may need to be more competitive in terms of pricing and may need to differentiate their products to attract customers. In markets with low price elasticity of demand, companies may have more pricing power and may be able to charge higher prices without losing customers.

Overall, price elasticity of demand plays a crucial role in shaping consumer behavior and market dynamics, influencing pricing strategies, competition, and overall market equilibrium.