Consider the markets for mobile and landline telephone service. Suppose that when the average income of residents of Plainville is $55,000 per year, the quantity demanded of landline telephone service is 12,500 and the quantity demanded of mobile service is 28,000. Suppose that when the average income increases to $60,000, the quantity demanded of mobile service increases to 33,000.

Suppose also that when the price of mobile service rises from $100 to $120 per month, the quantity demanded of landline service decreases to 11,000.

A. Using the midpoint method, what(numerical value) is the income elasticity of demand for mobile service?

B. Considering the income elasticity you computed above, what type of good is mobile telephone service? (normal good, or inferior good?)

C. Using the midpoint method, what(numerical value) is the cross price elasticity of demand for landline and mobile service?

D. Considering the cross price elasticity of demand for landline and mobile service, do the consumers of Plainville regard these goods as substitutes or complements?

5. A storm destroys half the bean crop. Is this event more likely to hurt bean farmers if the demand for beans is very elastic or very inelastic? Explain.