Price Elasticity 101: What Every Online Store Owner Should Know

Price elasticity of demand measures how sensitive your customers are to price changes. It's expressed as a single number: if your elasticity is -1.5, a 10% price increase will reduce unit sales by roughly 15%. If it's -0.4, the same increase only costs you about 4% in volume.

Elastic vs inelastic: why it matters

An elasticity value between 0 and -1 means your product is inelastic: customers are relatively insensitive to price. Luxury goods, niche products with few substitutes, and essential items tend to fall here. You can often raise prices without losing much volume, and gain on total margin.

An elasticity below -1 (like -1.8 or -2.4) means your product is elastic: customers shop around and a price increase will cost you sales faster than it gains you revenue. For these products, competitive pricing or strategic discounting often wins.

How to calculate it (without a spreadsheet)

The classic formula is: elasticity = % change in quantity / % change in price. In practice, real-world data is noisy. Promotions, seasonality, and inventory constraints all muddy the signal. The more robust approach is log-log regression over your full sales history, which is exactly what Zorin's model fitting step runs. The output is a single elasticity coefficient per product, along with an R-squared score that tells you how much to trust it.

Once you know your elasticity, the profit-maximizing price follows from a formula. Zorin runs this automatically and tells you whether to raise, lower, or hold, and by how much.