Why do managers need to know about elasticity of demand?

In fact, a manager must take into account the factors that influence the demand of a product to be more or less elastic.

For example, the type of needs satisfied by the product can influence the demand. If the product is of first necessity,the demand is inelastic, the product being bought, whatever the price. In return, if the product is luxury, the demand will be elastic, and if the price will increase slightly, more consumers would be able not to purchase it anymore.

Also, if there are  substitute products on market, their demand will be very elastic. For example, a small increase in price of olive oil can cause to a large number of women to decide to use sunflower oil, instead of olive oil.

Another factor that may influence the elasticity of demand  is asset's importance, in terms of cost. If the expenditure on that asset requires a very small percentage of their income, their demand will be inelastic. For example,the pencil. Variations in it's price  influence very little the consumer decision of buying it.

But it should be mentioned that there are different classes of elasticity. Phenomenon we've analyzed and called "elasticity" we should have been called "elasticity-price" , because it is trying to measure the sensitivity of demand to price changes.

Of course, demand may also be more or less sensitive to other factors and a manager is there to be able to identify and to assess,at first,all factors that will influence the demand.