Question

Why does if make sense that there was a negative percentage change in the quantity of cable TV subscriptions demanded in response to an increase in the price of these subscriptions?

Short answer

The price elasticity of demand for a product is determined by many factors other than the price of the product itself.

The availability of close substitutes such as e-mail, SMS, and other digital communication services has gradually reduced demand for postal services.

Step-by-step solution

Given information 

The given sentences are : (1)

Price elasticity of demand for a product depends on many factors.

Explanation (1)

The price elasticity of demand for a product is determined by many factors other than the price of the product itself. When any of these factors changes, the elasticity of the product tends to change. A product's demand is influenced by factors such as the availability of close substitutes, the consumer's income, and the presence of complements, in addition to its own price.

Given information

The given sentences are : (2)

The quantity of Postal Services relative demand for USPS.

Explanation (2)

The availability of close substitutes such as e-mail, SMS, and other digital communication services has gradually reduced demand for postal services. In such a case, calculating the proportionate change in Postal Services relative to a proportionate change in its own price will not yield the true price elasticity of demand for USPS. Other factors that were assumed to be constant are changing rapidly and must be considered.