TL;DR: It tells you how sensitive demand is to price changes.
You cannot price intelligently if you do not know how the market reacts.
Generic gasoline is often relatively inelastic for commuters. Luxury handbags are different: price can reinforce the signal.
Assuming every customer responds the same way.
It tells you how sensitive demand is to price changes.
You are here because this concept becomes more useful after Pricing Power and before Growth Loops.