Question

2. My monthly demand for cell phone service is as follows: − I am willing to pay up to $1 per minute for the first 10 minutes of use per month. − I am willing to pay up to $0.50 per minute for the next 20 minutes per month. − For all minutes beyond the 30th (covered above), my demand is P = 0.50 – Q/100. P is in dollars and Q is minutes.(You should think of those as additional minutes beyond 30. For example, if the price for those minutes was P = .10, then the consumer would demand 40 more minutes for a total of 70 minutes.)

My cell phone service provider offers two monthly plans:

Plan A: Unlimited minutes for $30 per month

Plan B: A $15 monthly fee plus $0.10 per minute for the first 20 minutes and $0.25 per minute beyond the 20th minute

Which cell phone service plan should I choose? For full credit provide complete details of each plan’s impact on me either with a graph or a detailed numerical description. Hint: They should choose the plan with the most consumer surplus. It will be helpful to draw out the individual's demand and the price they pay as their use changes under Plan B. You will need to figure out how many minutes they use under each plan.

Answer 1