A popular mobile phone brand priced their phones at $496 and sold 100,000 units in the previous financial year. They decided to reduce their price to $396 and subsequently sold 110,000 units in this financial year. Assume that demand is linear. Which of the following statements is true? A large number of substitutes in the market for mobile phones would explain why the demand is inelastic. The elasticity of demand is elastic at all points along the demand curve. The point elasticity of demand at a price of $396 is elastic. The point elasticity of demand at a price of $396 is 0.396. The point elasticity of demand at a price of $496 is 0.496.

To answer this question, we first need to calculate the price elasticity of demand. The formula for price elasticity of demand is:

% change in quantity demanded / % change in price

First, we calculate the % change in quantity demanded: (110,000 - 100,000) / 100,000 = 0.10 or 10%

Next, we calculate the % change in price: ($396 -$496) / $496 = -0.2016 or -20.16%

So, the price elasticity of demand is: 10% / -20.16% = -0.496

Now, let's evaluate each statement:

1. "A large number of substitutes in the market for mobile phones would explain why the demand is inelastic." This statement is false. A large number of substitutes would make demand more elastic, not inelastic, because consumers can easily switch to a different product if the price of one product increases.

2. "The elasticity of demand is elastic at all points along the demand curve." This statement is false. The elasticity of demand can vary along the demand curve.

3. "The point elasticity of demand at a price of $396 is elastic." This statement is false. The point elasticity of demand at a price of$396 is -0.496, which is inelastic (absolute value less than 1).

4. "The point elasticity of demand at a price of $396 is 0.396." This statement is false. As calculated above, the point elasticity of demand at a price of$396 is -0.496.

5. "The point elasticity of demand at a price of $496 is 0.496." This statement is also false. The point elasticity of demand at a price of$496 would be different because both the price and quantity would be different.

So, all of the statements are false.