Price Sensitivity

AAA

DEFINITION of 'Price Sensitivity'

The degree to which the price of a product affects consumers purchasing behaviors. The degree of price sensitivity varies from product to product and from consumer to consumer. In economics, price sensitivity is commonly measured using the price elasticity of demand.

INVESTOPEDIA EXPLAINS 'Price Sensitivity'

Widely available, homogeneous goods are more likely to exhibit high price sensitivity. For example, consumers are often not willing to pay even a few extra cents per gallon for gasoline, especially if a lower-priced station is nearby. Some consumers are more price sensitive than others. Consumers who are more frugal or who are on fixed incomes are more likely to pinch pennies and shop around for lower prices. Meanwhile, some high income consumers may feel it is not always worth their time to search for better deals on many items, and thus become less price sensitive.

RELATED TERMS
  1. Theory Of Price

    An economic theory that contends that the price for any specific ...
  2. Memory-Of-Price Strategy

    A trading strategy that assumes the support and resistance points ...
  3. Setup Price

    A price level predetermined as the point of entry into a specific ...
  4. Market Price

    The current price at which an asset or service can be bought ...
  5. Price Level

    The average of current prices across the entire spectrum of goods ...
  6. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity ...
RELATED FAQS
  1. No results found.
Related Articles
  1. Credit & Loans

    House Price Vs. Interest Rate: Which Is More Important?

    Deciding which factor is more important can make a difference in monthly payments, ability to move and Homowners Association fees.
  2. Taxes

    Beeronomics: Factors Affecting Your Pint

    Beer is a complex beverage shaped by supply and demand, production and distribution, with regulation thrown in for that extra kick.
  3. Options & Futures

    Increase Your Profits With Soft Or Mental Stops

    A soft stop provides a trader with added flexibility, allowing him to react to ongoing changes in the market.
  4. Personal Finance

    Why We Splurge When Times Are Good

    The concept of elasticity of demand is part of every purchase you make. Find out how it works.
  5. Home & Auto

    Foreclose On High Housing Prices

    Foreclosed homes may be financially appealing, but there are many obstacles to consider before buying.
  6. Budgeting

    How Your Government's Budgetary Decisions Impact the Public Sector

    Issues facing the public sector are not unlike some issues facing America’s oldest and largest companies, but with larger and broader impacts.
  7. Personal Finance

    What Drives Consumer Demand for Tesla?

    Tesla did not invent the electric vehicle market, but it has brought to it elements of luxury and elite status. But what really drives demand for Teslas?
  8. Budgeting

    Ready To Save Money While Eating Healthy?

    These six cheap and nutritious foods are a perfect way to deal with rising grocery prices while staying healthy.
  9. Economics

    Will Alex Tsipras Change The European Economy?

    A debt default and a Euro exit by Greece's leaders would likely cause more harm to Greece's economy than to the EU, of which Greece is just a small part.
  10. Investing

    What Is Hollywood Spending On Oscar Campaigns?

    Here's a look at how much Hollywood is spending this awards season to take home the gold at the 2015 Academy Awards.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center