Final answer:
In short, inelastic demand indicates that a slight change in price does not significantly affect the quantity of the good or service purchased by consumers. Products with inelastic demand include essentials or addictive goods that people continue to buy even at higher prices. Examples include gasoline, life-saving medicines, and addictive substances like cigarettes.
Step-by-step explanation:
If demand is price inelastic, then indeed, buyers do not respond much to a change in price. In economics, the term inelastic demand refers to a situation where the elasticity of demand is less than one. This indicates that a 1 percent increase in price paid by the consumer leads to less than a 1 percent change in purchases, showing a low responsiveness by consumers to price changes. A classic example of an inelastic demand is for addictive products like cigarettes, where consumers continue to buy even when prices rise because their addiction outweighs their sensitivity to price changes. Government policies often take advantage of inelastic demand. For instance, when taxes are introduced on inelastic goods, the tax burden can be largely passed on to consumers without a significant decline in the equilibrium quantity demanded. This is because consumers will still purchase these goods out of necessity or habit, despite higher prices.