Homework Help: economics

Posted by scott on Friday, November 20, 2009 at 9:25am.

In an article about the financial problems of USE Today, Newsweek reported that the paper was losing about $20 million a year. A Wall Street analyst said that the paper should raise its price from 50 cents to 75 cents, which he estimated would bring in an additional $65 million a year. The paper’s publisher rejected the idea, saying that circulation could drop sharply after a price increase; citing The Wall Street Journal’s experience after it increased its price to 75 cents. What implicit assumptions are the publisher and the analyst making about price elasticity?

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