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:________.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.

Answer 1

b

Step-by-step explanation:

answer

Answer 2

The correct answer is B) The demand for Tasty Treat Tea is elastic.

Step-by-step explanation:

An elastic demand is that demand that is sensitive to a change in price. In this way, a small variation in the price causes a more than proportional change in the quantity demanded. Thus, for example, if the price increases by 10% and in response the quantity demanded is reduced by more than 10%, then the demand is said to be elastic.

There are several factors that determine the elasticity of demand at a given time. Here are some factors that make demand tend to be more elastic:

• Goods with more and better substitutes have a more elastic demand than goods that lack substitutes
• In the long term the demands are more elastic than in the short term
• The goods in which the consumer spends an important part of his budget usually have a more elastic demand than those in which the portion of the expenditure is insignificant