When demand is considered inelastic, what occurs with price changes?

When demand is considered inelastic, it means that consumers are not highly responsive to changes in price. Specifically, the percentage change in price exceeds the percentage change in quantity demanded. This indicates that even if prices rise, the quantity demanded will decrease only slightly, and if prices fall, the increase in quantity demanded will also be minimal.

Inelastic demand often occurs for essential goods or necessities where consumers will continue to buy them even when prices increase, such as basic food items, utilities, and medications. The nature of inelastic demand is such that it shows a relatively consistent purchasing pattern, regardless of price fluctuations.

This concept is crucial for businesses and economists as it impacts pricing strategies and revenue projections. Understanding how consumers react to price changes helps in decision-making when setting prices for products that have inelastic demand.