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

question 207

Multiple Choice

Sonik, a 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 for text messaging shifted to the left.
• D) the demand for text messaging is elastic in this price range.

---

Definitions:

Sustainable

The quality of not being harmful to the environment or depleting natural resources, thereby supporting long-term ecological balance.

Substitution Effect

The change in consumption patterns due to a change in relative prices, where consumers substitute away from more expensive goods towards cheaper ones.

Income Effect

The alteration in the income of an individual or an economy and its impact on the demand for a specific good or service.

Private Saving

Private saving is the portion of household income that is not consumed or paid in taxes, but instead is saved or invested.