Price elasticity refers to the degree to which the demand for a product or service changes in response to a change in its price. It is a measure of how sensitive consumers are to changes in price, and is often used by businesses to determine the optimal price point for their products. A high price elasticity indicates that a small change in price will result in a significant change in demand, while a low price elasticity means that demand will remain relatively stable even with a change in price. Understanding price elasticity is crucial for businesses to make informed pricing decisions and stay competitive in the market.