ACCA Advanced Performance Management (APM) Practice Exam

When demand for a product, such as apples, is considered elastic, it means that consumers are sensitive to price changes. If the price of apples increases significantly and this leads to a substantial decrease in the quantity demanded, it demonstrates that consumers are willing to buy much less because of the price hike.

In this scenario, the characteristic of elastic demand is showcased: a relatively small change in price results in a larger change in quantity demanded. Consumers may seek alternatives, reduce consumption, or forgo purchases altogether. Therefore, when assessing the impact of an increase in price on the demand for apples, a substantial decrease in demand accurately illustrates elasticity.

On the other hand, scenarios like unchanged demand, increased demand, or only a slight decrease in demand would indicate inelastic or less sensitive responses from consumers, which contradicts the defined concept of elastic demand. Thus, 'a substantial decrease in demand' is the defining descriptive outcome for elastic demand in this context.