Jose works for the economic research department of the local utility company in his city. He is interested in the effect of a price increase in the demand for their services. He calculates that the price elasticity for the demand is -2.3. This means: A unit increase in price will induce a 2.3 unit of services decrease in consumption. Cable services are a Giffen good. Demand will increase by 2.3% if price increases by 1%. Demand will not change if price is increased. Demand will fall approximately by 2.3% if price increases by 1%.
Jose works for the economic research department of the local utility company in his city. He is interested in the effect of a price increase in the demand for their services. He calculates that the price elasticity for the demand is -2.3. This means: A unit increase in price will induce a 2.3 unit of services decrease in consumption. Cable services are a Giffen good. Demand will increase by 2.3% if price increases by 1%. Demand will not change if price is increased. Demand will fall approximately by 2.3% if price increases by 1%.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Jose works for the economic research department of the local utility company in his city. He is interested in the effect of a
A unit increase in price will induce a 2.3 unit of services decrease in consumption.
Cable services are a Giffen good.
Demand will increase by 2.3% if price increases by 1%.
Demand will not change if price is increased.
Demand will fall approximately by 2.3% if price increases by 1%.
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