Evaluating the impact of price elasticity on revenue management and strategic business decision-making

Objective: This study evaluates how price elasticity of demand shapes revenue management outcomes and strategic business decision-making. 
Methodology: An integrative review of economics, marketing, operations research and hospitality revenue-management literature was combined with a deterministic constant-elasticity scenario analysis. The scenario model estimated the revenue effects of price changes from -20% to +20% across elasticity values from -0.5 to -3.0 using a reproducible baseline price, quantity and revenue. 
Results: The review shows that elasticity converts pricing from a cost-plus or competitor-following activity into a decision system for segmentation, inventory allocation, promotion design, capacity control and governance of algorithmic pricing. Scenario results confirm the unit-elastic boundary: a 10% price increase raised revenue by 4.9% when elasticity was -0.5, had no revenue effect at -1.0 and reduced revenue by 9.1% when elasticity was -2.0. Conversely, price reductions created revenue gains only when demand was sufficiently elastic. Conclusion: Elasticity is not a static statistic but a dynamic managerial capability. Its practical value depends on credible demand estimation, controlled price experimentation, cross-functional integration and safeguards for fairness and transparency. Firms that embed elasticity into revenue management can improve revenue quality and strategic agility, whereas firms that ignore elasticity risk margin erosion, customer backlash and misallocation of scarce capacity.