In economics, the Law of Demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa. Price elasticity measures how responsive the quantity demanded is to a change in price. If a good is price elastic (e>1), a small change in price will lead to a proportionally larger change in quantity demanded. This means consumers are sensitive to price changes and will adjust their consumption accordingly. On the other hand, if a good is price inelastic (e<1), a change in price will result in a smaller change in quantity demanded. This implies that consumers are not very sensitive to price changes and will continue to buy the good even if the price increases. Understanding price elasticity is crucial for businesses when setting prices for their products. If a product is price elastic, lowering the price can lead to a significant increase in sales revenue. However, for price inelastic goods, increasing the price may not deter consumers from purchasing, resulting in higher profits for the business. In summary, the Law of Demand and price elasticity are important concepts in economics that help businesses and policymakers make informed decisions about pricing and market behavior.