[amp_mcq option1=”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” option2=”She will spend less than Rs. 200 per month on long-distance telephone call as the new price is an effective price floor” option3=”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” option4=”She will spend more than Rs. 200 per month on long-distance telephone calls as her demand has shifted out” correct=”option4″]<\/p>\n
The correct answer is: D. She will spend more than Rs. 200 per month on long-distance telephone calls as her demand has shifted out.<\/strong><\/p>\n When the price of a good decreases, the demand for that good will increase. This is because consumers will be able to buy more of the good at the lower price. In this case, Billoo will be able to buy more long-distance telephone calls at the lower price of Rs. 5 a minute. As a result, her demand for long-distance telephone calls will increase. This means that she will spend more than Rs. 200 per month on long-distance telephone calls.<\/p>\n Option A is incorrect because it is not possible to determine whether long-distance telephone calls are a normal good or an inferior good without knowing more about Billoo’s income and preferences.<\/p>\n Option B is incorrect because a price floor is a legal minimum price that must be charged for a good. In this case, there is no price floor, so the new price of Rs. 5 a minute is not an effective price floor.<\/p>\n Option C is incorrect because Billoo’s demand for long-distance telephone calls will increase, regardless of whether her demand is elastic or inelastic.<\/p>\n","protected":false},"excerpt":{"rendered":" [amp_mcq option1=”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” option2=”She will spend less than Rs. 200 per month on long-distance telephone call as the new price is an effective price floor” option3=”Whether she spends more or less than … <\/p>\n