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 that the:
A)demand for text messaging is inelastic in this price range.
B)demand curve for text messaging shifted to the right.
C)supply curve for text messaging shifted to the left.
D)demand for text messaging is elastic in this price range.

Question

Quizplus · Accepted Answer

The demand for text messaging is considered elastic in this price range because the quantity demanded (number of messages sent) increased significantly (tripled) in response to a price reduction (from $0.08 to $0.04 per message). Elasticity refers to the responsiveness of the quantity demanded to a change in price. In this case, a relatively small decrease in price led to a large increase in quantity demanded, indicating elasticity.

Sonik,a Wireless Phone Company,tested the Effect of a Price Reduction