You may call them what you like and might consider extending that same open-minded courtesy to others.
At any rate, you should be aware that the perfectly acceptable alternate terms are extremely well documented in TES lore. The following quotes from UESP wiki merely scratch the surface:
In the Imperial tongue, the haughty, tall, golden-skinned peoples of Summerset Isle are called High Elves, the Ayleid referred to them as Salache, but they call themselves Altmer, or the "Cultured People."
The Bosmer are the various barbarian Elven clan-folk of Valenwood, a forested province in southwestern Tamriel. In the Empire, they are often collectively referred to as Wood Elves, but "Bosmer", or "the Tree-Sap People", is what they call themselves.
In the game, have you not heard the rumors that the Altmer have extremely powerful wizards? Or about troubles in the land of the Dunmer?
For an Imperial, it would be perfectly natural to tend to use the high elf / wood elf type terms. My character is a Bosmer however, and it is equally natural for her to tend to use the traditional 'mer' terms that her kind have always used.