Is there an intuitive way to understand why this is so. I want this explained in a layman's terms. I know negative means they are inversely related, which is what you would expect most items to follow. The cheaper the price, the more demanded.
The price elasticity of demand measure how sensitive the consumer is in their demand to a change in price.
If the elasticity is really large (in negative terms), then a 1% change in price results in a large % change in quantity demanded.
So as the elasticity gets closer to 0, the sensitivity of the consumer is reduced.
The less sensitive the consumer is, the less they will change their demand if the firm charges more, so the company could increase price a little and demand won't go down very much, leading to potentially higher profits. This occurs when demand is inelastic.