What indicator helps to determine how consumers will react to price changes?

Price elasticity is the concept that measures how responsive the quantity demanded of a good or service is to a change in its price. This responsiveness is quantified as the percentage change in quantity demanded divided by the percentage change in price. A higher price elasticity indicates that consumers are more sensitive to price changes, meaning that if prices increase, they might significantly reduce their demand for that good or seek alternatives.

Understanding price elasticity helps businesses and policymakers predict and understand consumer behavior in response to price fluctuations. For example, if a product has high price elasticity, a small increase in price could lead to a substantial decrease in the quantity demanded, while a product with low price elasticity would remain in demand even with significant price changes.

The other options do not specifically address consumer reaction to price changes. Price stability refers to maintaining a low and stable inflation rate, which is broader and doesn't convey direct consumer behavior. Market equilibrium involves the interaction of supply and demand but doesn't specifically measure how consumers react to price changes. The consumer behavior index, though related to consumers, is more about overall consumer sentiment rather than their specific reactions to price changes. Therefore, price elasticity is the most relevant indicator in this context.