Price elasticity of demand measures the responsiveness or sensitivity of the quantity demanded of a good or service to a change in its price, calculated as the percentage change in quantity demanded divided by the percentage change in price. A price elasticity greater than 1 in absolute value indicates elastic demand — consumers significantly reduce purchases when prices rise (common for non-essential goods, luxury items, and commodities with substitutes). An elasticity less than 1 indicates inelastic demand — consumers continue purchasing despite price increases (common for essential goods, branded products, and items with few substitutes). Price elasticity of supply measures the responsiveness of quantity supplied to price changes. For equity investors and analysts on Ventura Securities, price elasticity is a critical input in sector and company analysis — businesses operating in inelastic demand segments (pharmaceuticals, utilities, branded FMCG, and insurance) can raise prices without significant volume loss, protecting margins and earnings stability, making them structurally more attractive in inflationary environments than companies in highly elastic, commoditised markets.
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