Lowering your price may help you increase revenue, but lower it too much and you cost yourself money. (via Understanding App Store Pricing — Part 3 — Jury.me )
Loosely speaking, we refer to situations where a percentage change in price leads to a larger percentage change in quantity sold as elastic. Situations where a the percentage change in price and quantity sold are roughly equal are called unit elastic. And situations where a percentage change in price leads to a smaller percentage change in quantity sold as inelastic.
Generally speaking, the elasticity of demand is affected by factors such as:
- Availability of substitute goods
- The necessity of the good
- Who’s paying for it
- Brand awareness and respect
- The percentage of income the purchase represents to the buyer