Why is price elasticity of demand important in modern business?

Why is price elasticity of demand important in modern business?

Why is price elasticity of demand important in modern business?

Why is price elasticity of demand important in modern business?

Price elasticity of demand is a measure that tells how the quantity of an item that can be sold varies when the price of the item varies.  If a firm raises its price and its revenues decline, the item it is selling has elastic demand.  The more the revenues go down, the more elastic it was.By contrast, if the firm raises its prices and revenues go up, the demand for the item was inelastic.As you can see from this definition, it is important to know if demand for your products is elastic or inelastic.  Knowing this will tell you as a business how to set your prices for maximum profit.
Why is price elasticity of demand important in modern business?