The nation's largest cable TV company tested the effect of a price reduction for premium movie channels.It increased prices from $9.95 to $12 and found virtually no change in the number of customers.This means:
A) the demand curve for the premium movie channels shifted to the right.
B) the supply curve for premium movie channels shifted to the left.
C) the demand for premium movie channels is very elastic in this price range.
D) the demand for premium movie channels is very inelastic in this price range.

Question

Quizplus · Accepted Answer

Since there was virtually no change in the number of customers despite a price increase from $9.95 to $12, this implies that the demand for premium movie channels is very inelastic in this price range, meaning that customers are willing to pay higher prices for the product, which results in no significant change in the quantity demanded. Therefore, option D is the best choice.

The Nation's Largest Cable TV Company Tested the Effect of a Price