Sonik, a Local Wireless Phone Company, Tested the Effect of a Price

question 15

Essay

Sonik, a local wireless phone company, tested the effect of a price reduction for text messaging.It lowered prices from $0.08 to $0.04 per message and found that the number of messages sent tripled.This means:
A.the demand for text messaging is inelastic in this price range.
B.the demand curve for text messaging shifted to the right.
C.the supply curve of text messaging shifted to the left.
D.the demand for text messaging is elastic in this price range.

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the equilibrium price, where market supply and demand balance each other.

Payoff Matrix

A table that displays the potential outcomes and strategies for each player in a game, used in game theory to determine the best strategies and predict the actions of the participants.

Duopoly

A market structure dominated by two companies, often resulting in closely competitive or collaborative strategies between them.

High-price Strategy

A pricing approach where goods or services are sold at a higher price point, typically justified by branding, quality, or unique features.