What does it suggest when the price elasticity of demand is less than 1?

When the price elasticity of demand is less than 1, it indicates that the percentage change in quantity demanded is less than the percentage change in price. This characteristic signifies that consumers are relatively insensitive to price changes. In other words, a price increase will lead to a smaller proportional decrease in the quantity demanded, and conversely, a price decrease will produce a smaller proportional increase in the quantity demanded.

This behavior is typical of goods that are considered necessities, where consumers will continue to purchase relatively stable amounts despite changes in price. Such goods might include basic staples like bread or milk, where demand remains stable regardless of fluctuating prices. This insensitivity to price changes is a hallmark of inelastic demand, hence confirming the assertion that demand is inelastic when the price elasticity of demand is less than 1.