Which aspect does price elasticity primarily analyze?

Price elasticity primarily analyzes demand sensitivity, which measures how responsive the quantity demanded of a good or service is to a change in its price. When price elasticity is high, even a small change in price can lead to a significant change in the quantity demanded. Conversely, if demand is inelastic, changes in price have little effect on the quantity demanded.

Understanding demand sensitivity is crucial for businesses when setting prices, as it helps them predict consumer behavior in response to pricing changes. For example, if a product has high elasticity, a company might choose to lower its prices to increase sales, knowing that it will attract more customers. On the other hand, if demand is inelastic, a business could raise prices without a substantial drop in sales, maximizing revenue.

The other options do not capture the core focus of price elasticity. Consumer preferences are focused more on what drives consumer choices rather than how those choices are affected by price changes. Pricing strategies involve broader considerations beyond just how demand responds to price shifts. Supply chain efficiency pertains to the operational aspects of delivering products rather than the relationship between price and demand.