Final answer:
Inelastic demand indicates that a price increase does not significantly alter consumer buying habits, as consumers are less responsive to price changes, often due to the product being a necessity or lack of substitutes.
Step-by-step explanation:
When the demand for a product is inelastic, it means that a price increase does not have a significant impact on buying habits. This indicates a low responsiveness by consumers to price changes. For example, if the price of a prescription medication goes up, people will still purchase it because it is a necessary item for their health. In this scenario, the elasticity of demand is less than one, indicating that a 1 percent increase in price leads to less than a 1 percent change in purchases. This low elasticity is often observed for goods that are considered necessities or for consumers with higher incomes who are less price-sensitive. Additionally, products with few substitutes typically exhibit inelastic demand, as consumers may not have other options to turn to even if prices climb.