PRICE ELASTICITY AND CONSUMER CHOICE IN INDIA – AN ECONOMIC ANALYSIS

Abstract

Price elasticity of demand (PED) is a key concept in understanding consumer behavior, particularly in a diverse economy like India. It measures the responsiveness of the quantity demanded of a good or service to changes in its price, providing insights into how consumers make choices under varying economic conditions. In India, factors such as income disparity, regional differences, cultural preferences, and access to alternatives heavily influence price elasticity. Essentials like food grains, fuel, and healthcare exhibit low elasticity, indicating that consumption patterns are relatively unresponsive to price fluctuations. In contrast, luxury goods, electronics, branded apparel, and non-essential services often demonstrate high elasticity, with small price changes significantly affecting demand. Price elasticity also interacts with brand loyalty, urban-rural dynamics, and technological adoption, further shaping consumer choices. Urban consumers, with higher exposure to digital platforms and marketing, display more elastic behavior for discretionary goods, while rural consumers tend to show inelastic patterns due to limited alternatives and budget constraints. Government policies, such as subsidies, price controls, and welfare schemes, moderate elasticity in essential goods, stabilizing consumption and influencing household decision-making. Additionally, the rise of digital platforms, dynamic pricing, and personalized offers has heightened sensitivity to price changes, particularly among tech-savvy populations. Understanding price elasticity in India is essential for firms designing pricing strategies, marketers targeting heterogeneous segments, and policymakers implementing interventions to ensure equitable access and efficient market outcomes. By analyzing how consumers respond to price variations, stakeholders can optimize pricing, promote welfare, and anticipate market trends in a complex and rapidly evolving economy.