The correct answer is D. highly elastic.
Elasticity of demand is a measure of how responsive consumers are to changes in price. It is calculated by dividing the percentage change in quantity demanded by the percentage change in price.
In this case, the percentage change in quantity demanded is 40%, and the percentage change in price is 20%. Therefore, the elasticity of demand is 40/20 = 2.
An elasticity of demand of 2 indicates that a 1% change in price will lead to a 2% change in quantity demanded. This is a highly elastic demand, which means that consumers are very responsive to changes in price.
A perfectly elastic demand curve is a horizontal line, which means that consumers are infinitely responsive to changes in price. A perfectly inelastic demand curve is a vertical line, which means that consumers are not responsive to changes in price. A unit elastic demand curve is a line with a slope of -1, which means that consumers are equally responsive to changes in price.
In conclusion, the elasticity of demand is 2, which indicates that a 1% change in price will lead to a 2% change in quantity demanded. This is a highly elastic demand, which means that consumers are very responsive to changes in price.