The following table gives some data on the demand for long distance telephone calls:
QTY (millions of minutes per day)
Price (cents per minute): SHORT RUN LONG RUN
10 700 1000
20 500 500
30 300 0
If the price rises from $.20 to $.30:
A. Graph the relationship.
B. Calculate the numerical elasticity of short-run demand. Is it unitary, elastic, inelastic, etc.?
C. Calculate the numerical elasticity of long-run demand. Is it unitary, elastic, inelastic, etc.?
D. Is the demand for calls more elastic in the short-run or long run?
E. Why would consumers demand 0 minutes in the long run if the price was $.30 per minute?