Question

With the increased usage of cell phone services, what should we expect to have happened to the price elasticity of demand for land-line telephone services? Group of answer choices It has become more income elastic It has become more price inelastic. The absolute value of the price elasticity coefficient has probably gone down. It has become more price elastic.

Answer 1

Answer:

It has become more price inelastic

Explanation:

Elasticity of demand for any good can be defined as degree of responsiveness of any good with respect to change in demand factors like price or income. Hence it signifies consumer sentiments as how will the goods demand change when there is change in price.

Highly elastic goods mean that with slight change in price there is large change in demand of good.

Highly inelastic goods mean any change in demand factor like income, price will not affect the demand of the goods.

Now going for landlines telephone. With the widespread use of mobiles phones, usage of landline phones has decreased significantly. Hence any change in price for landlines is not going to affect it demand as very few people are using it.

Using the above mentioned rational we can say that It has become more price inelastic is the most suitable answer.