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
Answer
A
The consumer no longer prefers the iced tea drink.
B
The demand for Tasty Treat Tea is elastic.
C
The demand for Tasty Treat Tea is inelastic.
D
The consumer no longer shops at Tasty Treat Tea.
Explanation
Price rises by 10%, while quantity demanded falls by 20%. The price elasticity of demand is 20% ÷ 10% = 2, which is greater than 1, so demand is elastic. Therefore, the correct choice is “The demand for Tasty Treat Tea is elastic.”
AI-written and checked against the verified answer.