The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It lowered prices 10% and found that the number of customers rose by almost 50%. 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 elastic in this price range.
d. the demand for premium movie channels is inelastic in this price range.
c
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You lend $5,000 to a friend for one year at a nominal interest rate of 10%. The CPI over that year rises from 180 to 190. What is the real rate of interest you will earn?
A) 0% B) 4.4% C) 5.5% D) 5.8%
The Lucas critique indicates that
A) advocates of discretionary policies' criticisms of rational expectations models are well-founded. B) advocates of discretionary policies' criticisms of rational expectations models are not well-founded. C) expectations are important in determining the outcome of a discretionary policy. D) expectations are not important in determining the outcome of a discretionary policy.