Understanding the concept of price elasticity of demand:
Price elasticity of demand measures the responsiveness of the quantity demanded of a good to a change in its price. It helps us understand how sensitive consumers are to price changes and whether the demand for a good is elastic or inelastic.

Calculating price elasticity of demand:
Price elasticity of demand (PED) is calculated using the following formula:
PED = (% Change in Quantity Demanded) / (% Change in Price)

Given information:
- Demand decreases by 20% (which is the % change in quantity demanded)
- Price increases by 10% (which is the % change in price)

Now, let's calculate the price elasticity of demand using the given information.

Step 1: Calculate the % change in quantity demanded.
% Change in Quantity Demanded = (New Quantity Demanded - Old Quantity Demanded) / Old Quantity Demanded
% Change in Quantity Demanded = (-20) / 100
% Change in Quantity Demanded = -0.2

Step 2: Calculate the % change in price.
% Change in Price = (New Price - Old Price) / Old Price
% Change in Price = 10 / 100
% Change in Price = 0.1

Step 3: Calculate the price elasticity of demand.
PED = (% Change in Quantity Demanded) / (% Change in Price)
PED = -0.2 / 0.1
PED = -2

Determining the interpretation of price elasticity of demand:
The value of price elasticity of demand helps us determine the elasticity of demand for a good. There are three possibilities:
1. Elastic demand: If the absolute value of PED is greater than 1, demand is elastic. This means that a small change in price leads to a relatively larger change in quantity demanded.
2. Inelastic demand: If the absolute value of PED is less than 1, demand is inelastic. This means that a change in price leads to a relatively smaller change in quantity demanded.
3. Unitary demand: If the absolute value of PED is equal to 1, demand is unitary elastic. This means that a change in price leads to an equal percentage change in quantity demanded.

Interpreting the given answer:
The correct answer is option B) 2. This means that the value of price elasticity of demand for the given good is 2, indicating elastic demand. A 10% increase in price led to a 20% decrease in quantity demanded, implying that consumers are relatively price-sensitive and responsive to price changes.