What are the importance of elasticity?

Answer 1

In economic terms, an elastic demand is one that will vary with price, so the consumer might enjoy consuming this particular product but only if the price seems reasonable. There could be alternative products that are quite acceptable. If you like grapefruit juice but it becomes very expensive, you may wish to buy Orange Juice instead. If grapefruit and orange juice are both very expensive, you might wish to drink cranberry juice instead. So elasticity of demand creates a limit on what can be charged for a product. In comparison, some products have a relatively inelastic demand. People will continue to buy gasoline for their cars, almost regardless of what it costs. The alternative is to buy an electric car, which is enormously expensive. So gasoline prices can get very high.