Scenario 5-4 ​

question 139

Essay

Scenario 5-4
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Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000. Suppose also that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.
-Refer to Scenario 5-6. Considering the cross price elasticity of demand for mobile and landline telephone service, is the cross price elasticity of demand positive or negative and do the consumers of Plainville regard these goods as substitutes or complements?

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Definitions:

Ultra HD TV

Ultra HD TV refers to televisions that have a resolution significantly higher than traditional high-definition (HD), offering sharper and more detailed images.

Discount

A reduction from the usual cost of something, typically given for prompt or advance payment or to a special category of buyers.

Principal

A principal can refer to the main party involved in a financial transaction or the original amount of a debt or investment before interest.

Wrongful Acts

Actions or behaviors that are illegal or immoral, leading to harm or injury against another person or entity.