"You can call me whatever you want, Alec. I've never indicated a preference one way or the other. You have free will, after all. I expect you to use it."

He's not understanding at all that this could be an emotional issue for Alec. It's hard for him to understand any emotional issue, generally, so he tends to take things at face value, and is genuinely confused as to why Alec would think a word makes him cranky.