Billoo currently spends Rs. 200 per month on long-distance telephone calls. If the telephone company decides to reduce the rate from Rs. 10 a minute to Rs. 5 a minute, then

A) Whether she spends more or less than Rs. 200 per month depends on whether long-distance telephone calls are a normal good or an inferior good B) She will spend less than Rs. 200 per month on long-distance telephone call as the new price is an effective price floor C) Whether she spends more or less than Rs. 200 per month on long-distance telephone calls depends on whether her demand is elastic or inelastic D) She will spend more than Rs. 200 per month on long-distance telephone calls as her demand has shifted out

Answer & Solution

Correct Answer: Option C

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Billoo currently spends Rs 200 per month on long-distance telephone calls...

Billoo currently spends Rs. 200 per month on long-distance telephone calls. If the telephone company decides to reduce the rate from Rs. 10 a minute to Rs. 5 a minute, then

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