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:

Fixed Costs

Expenses that do not change in relation to production volume or business activity level, such as rent or salaries.

Break-Even Point

The financial level at which total revenues equal total expenses, resulting in no net profit or loss.

High-Low Method

A technique used in accounting and finance to estimate fixed and variable costs based on the highest and lowest levels of activity.

Factory Machine Hours

A measure of production time, indicating the total hours that machinery is operated in the manufacturing process.