What does inelastic demand indicate in terms of price changes?

Inelastic demand suggests that consumers are not very responsive to changes in price. This means that when the price of a product increases, the quantity demanded decreases only slightly. This behavior is typical for essential goods or those with few substitutes—such as medication or basic utilities—where consumers will continue purchasing even if the price increases because they perceive no alternative.

In the context of price changes, a relatively large increase in price resulting in only a small decrease in quantity demanded aligns perfectly with this concept. This reflects that while consumers feel the effect of a price change, their overall consumption remains largely stable despite the price hike.

The other options reflect misunderstandings of demand elasticity. For instance, a small price increase leading to a significant increase in quantity demanded outlines a scenario typical of elastic demand, where consumers react strongly to price changes. The idea that an increase in quantity demanded corresponds with a decrease in price aligns more with the law of demand's normal behavior, but it does not speak to inelastic demand specifically. Lastly, describing demand as highly responsive to price changes indicates elastic demand rather than inelastic demand. Thus, the characterization of inelastic demand is best captured by the understanding that significant price changes yield only minor shifts in quantity demanded.