How elasticity affects a company pricing?

Elasticity measures how sensitive the quantity demanded of a product is to changes in its price. If a product has high price elasticity, a small increase in price can lead to a significant drop in sales, prompting companies to keep prices lower to maintain demand. Conversely, for products with low elasticity, companies can increase prices with less risk of losing customers, often maximizing revenue. Understanding elasticity helps companies strategically set prices to optimize sales and profits based on consumer behavior.