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.

Question

Quizplus · Accepted Answer

The demand for text messaging is elastic in this price range because the quantity demanded increased significantly (tripled) in response to a price reduction, indicating a high sensitivity to price changes.

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