Final answer:
When the percentage change in quantity demanded exceeds the percentage change in price, the demand is considered price elastic, indicating high responsiveness to price changes.
Step-by-step explanation:
When the percentage change in quantity demanded is larger than the percentage change in price, demand is said to be price elastic. This scenario is when a given percentage increase in the price of a product results in a larger percentage decrease in the quantity demanded of that product. For example, a 5% increase in price might cause a 10% decrease in quantity demanded, indicating that the good or service is highly responsive to changes in price. Conversely, price inelastic demand would be indicated by a smaller percentage change in quantity demanded than the percentage change in price, and unit price elastic demand is when these two percentages are equal. The concept of price elasticity of demand is important in economics as it helps to understand how changes in price influence consumer behavior and the total revenue for companies.