Price elasticity of demand is a concept that measures how sensitive people are to changes in prices.

Elastic Demand: Consider selling tickets to a concert. When the ticket prices increase, some people might decide not to go and opt for other forms of entertainment, like watching a movie at home or going to a different event. This shows that there are alternative options available, leading to a significant change in demand with a small change in price.

Inelastic Demand: Now, think about gasoline. Even if the price goes up, people still need to buy gasoline to fuel their cars for work or other essential activities. So, the demand for gasoline stays mostly the same with price fluctuations because it's a necessity.

Understanding the price elasticity of demand is crucial for businesses to make informed decisions about pricing strategies. For instance, if they are selling a product whose demand is elastic,such as concert tickets, they must be cautious about raising prices too much. However, they have more leeway with pricing adjustments if they are selling something with inelastic demand, like gasoline.