Elasticity

Elasticity in business intelligence and data analytics isn’t about stretching rubber bands; it’s a concept that measures how much the demand for a product or service changes when other factors, like price or income, shift. Think of it like a seesaw. If the price goes up, the demand might go down, and that movement can be either big or small—that’s what elasticity tells us. In other words, it’s a way to understand how sensitive customers are to changes in prices or their own financial situations.

For instance, if a business raises the price of an ice cream cone and suddenly sells a lot fewer cones, that means the demand for ice cream is ‘elastic’—customers are very sensitive to the price change. If they don’t sell much less, then demand is ‘inelastic’—customers will buy about the same amount no matter the price. This is crucial for businesses because it helps them predict what might happen to their sales as they make changes like adjusting prices or introducing new products.

Elasticity helps companies make smarter decisions about pricing, promotions, and product development. By understanding elasticity, businesses can set prices that maximize their profits without scaring customers away. It’s all about finding the sweet spot where the price feels right to customers, and the business still makes a good profit.