The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It increased prices from $20 to $30 per month and found virtually no change in the number of customers. 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 very elastic in this price range.
D)the demand for premium movie channels is very inelastic in this price range.

Question

The nation's largest cable TV company tested the effect of a price reduction for premium movie channels. It increased prices from $20 to $30 per month and found virtually no change in the number of customers. 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 very elastic in this price range.
D)​the demand for premium movie channels is very inelastic in this price range.

Quizplus · Accepted Answer

The lack of change in the number of customers despite a 50% price increase indicates that the demand for premium movie channels is very inelastic in this price range. This means that customers are willing to continue paying the higher price, and thus the demand curve is relatively stable.

The Nation's Largest Cable TV Company Tested the Effect of a Price