Mangement Analysis: Entity Relationship Diagram

Entity Relationship Diagram (ERD), What is the purpose of ERD? Can you explain using the below scenario? How can this be used to enhance my business?

AlohaPets put on events for local pet owners. The company needs a database designed to keep track of the sponsor for the event and where the event is located. Each event needs a description, data, and cost. Separate costs are negotiated for each event. The company would also like to have a list of potential sponsors that includes each sponsor's contact information, such as the name, phone number and address. Each event will have a single sponsor, but a particular sponsor may sponsor more than one event. Each location will need an ID, contact person, and phone number. A particular event will use only one location, but a location may be used for multiple events.