tasty treat tea is a popular iced tea drink. when the manufacturer begins to use imported tea leaves, the…

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\no the consumer no longer prefers the iced tea drink.\no the demand for tasty treat tea is elastic.\no the demand for tasty treat tea is inelastic.\no the consumer no longer shops at tasty treat tea.

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\no the consumer no longer prefers the iced tea drink.\no the demand for tasty treat tea is elastic.\no the demand for tasty treat tea is inelastic.\no the consumer no longer shops at tasty treat tea.

Answer

Answer:

The demand for Tasty Treat Tea is elastic.

Explanation:

Step1: Recall elasticity formula

Elasticity of demand = $\frac{%\text{ change in quantity demanded}}{%\text{ change in price}}$

Step2: Calculate elasticity value

Given % change in quantity demanded = 20% and % change in price = 10%. So, elasticity of demand = $\frac{20%}{10%}= 2$.

Step3: Interpret elasticity

Since 2 > 1, demand is elastic. When elasticity of demand > 1, quantity demanded changes by a larger percentage than the price change.