What is the term for demand that changes in response to variations in price?

The term for demand that changes in response to variations in price is referred to as elastic demand. When demand is elastic, it means that consumers are sensitive to price changes; thus, a slight increase or decrease in price will result in a significant change in the quantity demanded. For example, if the price of a product rises, buyers may seek alternatives or reduce their purchases, leading to a notable drop in quantity demanded. Similarly, if the price decreases, consumers might increase their purchases because the product is perceived as more affordable.

Elastic demand reflects the responsiveness of consumers to price fluctuations, which is a critical concept in economics and helps businesses in pricing strategies, as they can predict how changes in price might affect their sales and revenue. Understanding this type of demand allows companies to maximize profits and optimize their market strategies effectively.