Price Sensitivity

A A A

DEFINITION

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

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 good/service ...
  2. Memory-Of-Price Strategy

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

    A price level predetermined as the point of entry into a specific security, ...
  4. Price Elasticity Of Demand

    A measure of the relationship between a change in the quantity demanded of a ...
  5. Market Price

    The current price at which an asset or service can be bought or sold. Economic ...
  6. Price Level

    The average of current prices across the entire spectrum of goods and services ...
  7. Debt Consolidation

    The act of combining several loans or liabilities into one loan. Debt consolidation ...
  8. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where income is ...
  9. Marginal Rate of Technical Substitution

    The rate at which one factor has to be decreased in order to retain the same ...
  10. Absolute Advantage

    The ability of a country, individual, company or region to produce a good or ...
Related Articles
  1. House Price Vs. Interest Rate: Which ...
    Credit & Loans

    House Price Vs. Interest Rate: Which ...

  2. Beeronomics: Factors Affecting Your ...
    Taxes

    Beeronomics: Factors Affecting Your ...

  3. Increase Your Profits With Soft Or Mental ...
    Options & Futures

    Increase Your Profits With Soft Or Mental ...

  4. Why We Splurge When Times Are Good
    Personal Finance

    Why We Splurge When Times Are Good

  5. Foreclose On High Housing Prices
    Home & Auto

    Foreclose On High Housing Prices

  6. 5 Things You Shouldn't Do During A Recession
    Budgeting

    5 Things You Shouldn't Do During A Recession

  7. Great Company Or Growing Industry?
    Markets

    Great Company Or Growing Industry?

  8. A Day Without Spending, A Lifetime's ...
    Budgeting

    A Day Without Spending, A Lifetime's ...

  9. Debt Consolidation: When It Helps, When ...
    Credit & Loans

    Debt Consolidation: When It Helps, When ...

  10. How do I lower my debt-to-income (DTI) ...
    Credit & Loans

    How do I lower my debt-to-income (DTI) ...

comments powered by Disqus
Hot Definitions
  1. Pension Risk Transfer

    When a defined benefit pension provider offloads some or all of the plan’s risk – e.g.: retirement payment liabilities to former employee beneficiaries. The plan sponsor can do this by offering vested plan participants a lump-sum payment to voluntarily leave the plan, or by negotiating with an insurance company to take on the responsibility for paying benefits.
  2. XW

    A symbol used to signify that a security is trading ex-warrant. XW is one of many alphabetic qualifiers that act as a shorthand to tell investors key information about a specific security in a stock quote. These qualifiers should not be confused with ticker symbols, some of which, like qualifiers, are just one or two letters.
  3. Quanto Swap

    A swap with varying combinations of interest rate, currency and equity swap features, where payments are based on the movement of two different countries' interest rates. This is also referred to as a differential or "diff" swap.
  4. Genuine Progress Indicator - GPI

    A metric used to measure the economic growth of a country. It is often considered as a replacement to the more well known gross domestic product (GDP) economic indicator. The GPI indicator takes everything the GDP uses into account, but also adds other figures that represent the cost of the negative effects related to economic activity (such as the cost of crime, cost of ozone depletion and cost of resource depletion, among others).
  5. Accelerated Share Repurchase - ASR

    A specific method by which corporations can repurchase outstanding shares of their stock. The accelerated share repurchase (ASR) is usually accomplished by the corporation purchasing shares of its stock from an investment bank. The investment bank borrows the shares from clients or share lenders and sells them to the company.
  6. Microeconomic Pricing Model

    A model of the way prices are set within a market for a given good. According to this model, prices are set based on the balance of supply and demand in the market. In general, profit incentives are said to resemble an "invisible hand" that guides competing participants to an equilibrium price. The demand curve in this model is determined by consumers attempting to maximize their utility, given their budget.
Trading Center