What characterizes price inelastic demand?

Price inelastic demand is characterized by a situation where changes in the price of a good or service result in relatively small changes in the quantity demanded. This implies that consumers will continue to purchase almost the same amount of a good even when its price increases or decreases.

The fundamental reason is that the goods or services in question are often necessities or have few substitutes, making consumers less sensitive to price changes. For instance, if the price of insulin rises, a diabetic patient still needs it and will purchase it regardless of the price increase, leading to a smaller percentage decrease in demand compared to the percentage increase in price.

In contrast, options referring to significant changes in demand due to price fluctuations indicate price elastic demand, which reflects a different relationship where consumers are more responsive to price changes. Additionally, the ideas of demand decreasing with an increase in price or increasing with a decrease in price are general observations applicable to most goods (known as the law of demand) but do not specify the nature of elasticity, which is the focus in this context. Thus, the classification of price inelastic demand focuses on the minimal responsiveness of quantity demanded to price changes.