Please explain. Thanks! Over a ten year period, the monthly charge for cellular
ID: 1096630 • Letter: P
Question
Please explain. Thanks!
Over a ten year period, the monthly charge for cellular phone service decreased from $80 per month to $30 per
month. At the same time, the number of subscribers increased from less than 5 million to more than 125 million.
Which of the following provides the best explanation for these changes?
a) An increase in consumer income over this ten year period.
b) A reduction in the price of residential phone service, a substitute for cellular phone service.
c) An increase in population and standard of living over this ten year period
d) Technological improvements that reduced the cost of supplying cellular phone service
Explanation / Answer
The answer will be:
d) Technological improvements that reduced the cost of supplying cellular phone service
Improved technology has lowered costs for consumers and as a result the number of subscribers has increased.
We cannot assume that the standard of living has improved or that real income has increased over the ten year period.