The price elasticity of demand measures the degree to which the volume of sales for a product or service is affected by a change in price

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The price elasticity of demand can be used to estimate the optimal price that maximizes profits by balancing the increase in revenue from higher prices with the decrease in sales from lower demand. Variable cost is also taken into account to ensure that the price covers the cost of producing the product or service. Therefore, it is true that the profit-maximizing price can be computed using the price elasticity of demand and variable cost.

The Price Elasticity of Demand Measures the Degree to Which