Businesses can use something called price elasticity to help them set good prices. Price elasticity is all about how customers react when prices go up or down. Here’s how businesses can use it:

1. Know Your Product: First, they need to figure out if their product is elastic or inelastic.

   • If it's elastic, this means that when prices change, the demand changes a lot. For example, luxury items like smartphones usually fall into this group.
   • If it’s inelastic, it means that when prices change, the demand doesn’t change much. An example of this is bread, which people need no matter the price.

2. Set the Right Prices:

   • For items that are elastic, lowering prices a bit can actually lead to more sales. This means they could make more money overall.
   • But if a product is inelastic, they can increase prices without worrying too much about losing customers.

3. Watch the Competition:

   • It’s important for businesses to pay attention to what their competitors are doing with prices. By doing this, they can adjust their own prices to stay competitive and keep making a profit.

By using these steps, businesses can do a great job of improving their position in the market!