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:

Conditioned Response

A conditioned response is a learned reaction or response to a previously neutral stimulus that has become significant through association.

Unconditioned Response

An automatic, natural response to a stimulus that does not require previous conditioning or learning.

Trial-And-Error

A problem-solving method involving repeated, varied attempts which are continued until success, or until the agent stops trying.

Negative Reinforcement

A behavioral principle where the removal of an unpleasant stimulus following a particular behavior increases the likelihood of that behavior being repeated.