The Cross-Price Elasticity of Demand Between an Unlimited Texting Option

question 215

Multiple Choice

The cross-price elasticity of demand between an unlimited texting option and an unlimited call minutes option offered from a cell phone provider would be

• A)positive if subscribers consider the services substitutes for each other.
• B)positive if subscribers consider the services complements to each other.
• C)negative if subscribers consider the services substitutes for each other.
• D)negative no matter if subscribers consider the services substitutes or complements for each other.

---

Definitions:

Shares Outstanding

The total number of a company's shares that are currently owned by all its shareholders, including those held by institutional investors and restricted shares held by company’s insiders.

Stock Split

A corporate action in which a company divides its existing shares into multiple shares to boost the liquidity of the shares, though the overall value of one's holdings remains the same.

Shareholder Wealth

The total value of a shareholder's equity in a company, taking into account the current market value of shares owned.

Trading Range

A price range in which stocks are thought to appeal to the widest variety of investors. Typically between $30 and $100. Stock splits function to keep prices within a trading range when the stock is appreciating.