Which term describes a scenario where quantity demanded changes significantly in response to price changes?

The term that describes a scenario where quantity demanded changes significantly in response to price changes is elastic demand. This concept relates to how consumers react to price fluctuations; when demand is elastic, a small change in price leads to a larger change in the quantity demanded. This behavior is typically observed in markets for non-essential goods or services where substitutes are readily available, allowing consumers to shift their purchases based on price changes.

In contrast, inelastic demand indicates that quantity demanded changes very little even when prices fluctuate significantly. Unitary elasticity refers to a situation where the percentage change in quantity demanded is exactly equal to the percentage change in price, resulting in a balanced response. Perfectly inelastic demand describes a situation where quantity demanded does not change at all, regardless of price changes, often seen with essential goods that consumers will buy regardless of price. Therefore, the understanding of elastic demand is crucial for businesses to set pricing strategies that can maximize revenue based on consumer behavior.