What does elastic demand refer to in terms of price change?

Elastic demand refers to a situation in which a change in price leads to a more than proportional change in the quantity demanded. When the correct choice states that the change in demand is more than the change in price, it highlights the sensitivity consumers have to price fluctuations. This means that when prices drop, the quantity demanded increases significantly, and conversely, when prices rise, the quantity demanded decreases significantly.

Elastic demand is typically represented by a price elasticity greater than one. For example, if the price of a product decreases by 10%, and as a result, the quantity demanded increases by 20%, this demonstrates elastic demand. This concept is key in pricing strategies and understanding consumer behavior, as it allows businesses to predict how changes in pricing can impact sales volume and overall revenue. The understanding of elastic demand aids marketers in making informed decisions about pricing and promotions to optimize sales.