What does it indicate when the demand for a commodity is elastic?

When the demand for a commodity is described as elastic, it refers to a situation where consumers are highly responsive to changes in price. Specifically, if the price elasticity of demand is greater than one, it indicates that a percentage change in price will result in a larger percentage change in the quantity demanded. For example, if the price of a product rises by 10% and the quantity demanded decreases by 20%, the price elasticity of demand would be 2, demonstrating elastic demand.

This characteristic is significant for businesses and policymakers, as it suggests that price increases could lead to a substantial drop in sales, while price decreases could significantly increase sales. Commodities with elastic demand often have readily available substitutes, which further enhances the consumers' responsiveness to price changes.

In contrast, a situation where the price elasticity is less than one reflects inelastic demand, where quantity demanded changes very little with price changes. A fixed price across all quantities suggests no responsiveness to quantity changes and would not demonstrate elastic demand. Similarly, the quantity demanded not responding to price changes reinforces the idea of inelastic demand rather than elastic. Thus, option A accurately identifies the condition under which demand is considered elastic.