ENTREPRENEURSHIP

Detailed explanation-1: -Definition: Demand sensitivity is also known as price elasticity of demand and should not be confused with price elasticity of supply. It shows the responsiveness of the demand for a product to a change in its price.

Detailed explanation-2: -The price elasticity of demand (PED) measures the percentage change in quantity demanded by consumers as a result of a percentage change in price. This measurement of price elasticity of demand is calculated by dividing the % change in quantity demanded by the % change in price, represented in the PED ratio.

Detailed explanation-3: -If demand is elastic, the quantity demanded is very sensitive to price, e.g. when a 1% rise in price generates a 10% decrease in quantity. If demand is inelastic, the good’s demand is relatively insensitive to price, with quantity changing less than price.