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April 26, 2015

Homework Help: home economics

Posted by Gar on Thursday, April 14, 2011 at 2:41pm.

In an article about the financial problems of USA 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 t o75 cents, which he estimates 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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