Respuesta :
Answer: Cell phone companies found that when they raised the price of connecting to wireless hot spots, demand decreased more than proportionally among casual users but decreased less than proportionally among businesspeople. this is because wireless connectivity is a luxury or non-essential good for casual users but an essential good for business people.
Casual users tend to use the wireless if and only when they can afford it i.e. it is not an essential commodity for them. That is why, the demand decreased more than proportionally among casual users, when prices increased.
On the other hand, wireless hotspots help business people to get their work done in a speedy and efficient manner. So wireless hotspots become more essential to business people. Therefore the demand is relatively inelastic for connectivity and falls less than proportionally for business people.
This is because wireless connectivity is an inelastic good for casual users but an elastic good for businesspeople.
Further Explanation:
Inelastic Good: The inelastic goods are those goods whose demanded is not affected by the change in the prices. If the price of the goods increases, then the quantity demanded almost remain the same.
Elastic demand: The elastic goods are those goods whose demanded is affected by the change in the prices. If there is an increase in price of the goods, the quantity demanded also changes.
The wireless hot spot is a non-essential good for casual users that are the reason they have an inelastic demand for the wireless hot spot. It means that demand will not be affected by the change in prices. In the case of a businessman, it is an essential good which means the quantity demanded will be affected by the change in prices.
Therefore, wireless connectivity is an inelastic good for casual users but an elastic good for businesspeople.
Learn more:
1. Learn more about the profit margins
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2. Demand and supply of goods
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3. Elasticity of demand
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Answer details:
Grade: Middle School
Subject: Economics
Chapter: Elasticity of demand
Keywords: cell phone companies, price of connecting, wireless hot spots, demand decreased, casual users, businesspeople, wireless connectivity, inelastic good, elastic good, the elasticity of demand, wireless connectivity is a(n), elasticity, inelastic, economics.
