Question: Please type it out on your laptop, not write it on paper. thank you At an Asian mobile service provider, the demand for voice calls

Please type it out on your laptop, not write it on paper. thank you

At an Asian mobile service provider, the demand for voice calls had an own-price elasticity of 0.085 and cross-price elasticity with respect to the price of short message service (SMS) of 0.078. The demand for SMS had an own-price elasticity of 0.03 and cross-price elasticity with respect to the price of voice calls of 0.03. (Source: Youngsoo Kim, Rahul Telang, William B. Vogt, and Ramayya Krishnan, "An empirical analysis of mobile voice service and SMS: A structural model,"Management Science, Vol. 56, No. 2, February 2010, pp. 234-252.)

(a)

For which service was the demand more price inelastic?

(b)

How would you describe the relation between the demand for voice calls and for SMS? Are they (i) complements, or (ii) substitutes?

(c)

Which is the relatively stronger complement/substitute? (i) SMS for voice calls, or (ii) voice calls for SMS?

(d)

Describe the impact on revenues from (i) voice and (ii) SMS if the provider were to raise the price of voice calls by 5%.

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