Question

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.

Explanation:

To determine the answer, we analyze the price and quantity demanded changes. Price elasticity of demand is calculated as the percentage change in quantity demanded divided by the percentage change in price. Here, the price rises by 10% and quantity demanded falls by 20%. The absolute value of the elasticity would be $\frac{20\%}{10\%} = 2$, which is greater than 1. When elasticity is greater than 1, demand is elastic, meaning quantity demanded is very responsive to price changes. The other options are incorrect: a change in preference or shopping location isn't indicated, and inelastic demand would have a smaller quantity change than price change.

Answer:

The demand for Tasty Treat Tea is elastic.