Last night I was at a house party and was teasing this girl (she's my girlfriend's friend so I've known her for a while) and I described her silly dance moves as "retarded" in a light hearted joking manner.

Switch goes off, you can see her eyes light up with rage and starts yelling at me "Don't say that word it's offensive I can't believe you would use that word as a derogatory blah blah" obviously one of her minions takes her side and starts lecturing me as well.

My response was to argue, try to keep frame but let them know that I didn't mean it in an offensive way and was not about to take shit about it. I was really pissed off because I took it as a sign of disrespect. I should have just completely ignored both of them, I don't know. What would your response be in this situation?

In large social settings, should you have your PC filter on? Do I need to avoid being more crude around people, or would it not matter if I had higher status?