Option 1 -> Price Inelastic means demand changes less proportionally than price (elasticity < 1).
Option 2 -> Price Elastic means demand changes more proportionally than price (elasticity > 1).
Option 3 -> Unit Elastic means demand changes proportionally equal to price (elasticity = 1).
Option 4 -> Income elastic refers to income elasticity, not price elasticity.
Hence, Option 2: Price Elastic -> Price elasticity of demand = (% change in demand / % change in price) = (-12% / 10%) = -1.2. The absolute value is 1.2, which is greater than 1, indicating that demand is price elastic. This means demand is responsive to price changes - a small percentage change in price leads to a larger percentage change in quantity demanded. -> correct