Tasty treat tea is a popular iced tea drink. when the manufacturer begins to use imported tea leaves, the price rises by 10%, and the quantity demanded falls by 20%. the fact that quantity demanded changed by more than the price change suggests that the consumer no longer prefers the iced tea drink. the demand for tasty treat tea is elastic. the demand for tasty treat tea is inelastic. the consumer no longer shops at tasty treat tea.

The answer is "the demand for Tasty Treat Tea is elastic".

There are two variables here: (i) Price and (ii) Demand. The responsiveness or sensitivity change of the demand for a particular product to other economic variables like price, income etc. is called elasticity of demand. The elasticity of demand is based on percent change in the demand quantity by a percent change in price which is called price elasticity of demand. The demand elasticity guides the companies to predict or forecast the price or production of the products. If the demand for the product is more elastic in response to the price change, then the companies should use precaution when increasing prices. On the contrary, if the demand for the product is less elastic in response to the price change, then the companies can freely go ahead when increasing prices. In other words, when we divide if the elasticity quotient is greater than or equal to 1, the demand is said to be elastic. If the elasticity quotient is less than one, the demand is said to be inelastic.

The elasticity of demand =  % change in quantity

                           % change in price

Elastic = strongly responsive ∈>1 (demand falls with price fluctuation)

Unit Elastic = equally responsive ∈=1 (demand is equal to price)

Inelastic = weakly responsive ∈<1 (demand rises with price fluctuation)

In the case of Tasty Treat Tea E is equal to:

20%

= 2

10%

∈ is 2 meaning greater than 1. Therefore, ∈ is elastic. The demand falls with the change in the price increase for the Tasty Treat iced tea.

B is the answer. You will get this one correct

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