What defines the demand for a product being considered elastic?

When discussing the demand for a product being considered elastic, the key concept revolves around how responsive the quantity demanded is to changes in price. Specifically, demand is classified as elastic when the price elasticity of demand is greater than one. This indicates that a percentage change in price leads to a larger percentage change in the quantity demanded. For example, if the price of a product decreases by 10% and the quantity demanded increases by more than 10%, the demand for that product is considered elastic.

In contrast, if a product's demand is inelastic (with an elasticity less than one), quantity demanded changes less than proportionally in response to price changes. When demand is unitary elastic, the elasticity equals one, meaning the percentage change in price results in an equal percentage change in quantity demanded. Lastly, perfect inelasticity suggests that quantity demanded remains constant regardless of price changes, which is not indicative of elastic demand.

Therefore, understanding that an elasticity greater than one represents a significant responsiveness in quantity demanded to price changes clarifies why this characteristic defines elastic demand.