economics

1. 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 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?

  1. 👍
  2. 👎
  3. 👁
  1. Analyst: low elasticity / low price sensitivity: people won't react to the increase in price by not buying it, so revenue will increase.

    Publisher: high elasticity / high price sensitivity: people will react strongly to the price hike, so the gain in revenue from increasing price will be offset by the drop in revenue from fewer sales.

    1. 👍
    2. 👎

Respond to this Question

First Name

Your Response

Similar Questions

  1. Social studies

    What is a major risk of using a financial institution? A. The financial institution may fail entirely. B. Financial institutions may choose not to pay investors back C. Investors can be unable to withdraw money when they need it

  2. World geography

    how do you do this question: Use a print news or online news source to find an article that illustrates concepts presented in this lesson. Choose an article reporting on a site where a conflict is likely to occur in the future.

  3. history

    PROJECT: SUMMARIZE IT! The ability to summarize information is a vital component to understanding the information you read in your coursework. To summarize information: create a brief statement that explains the meaning of

  4. investing

    Which of the following statements is true about financial planning? A. Any kind of financial expert (such as a stockbroker, lawyer, or accountant) can help you develop a comprehensive financial plan. B. Once you have painstakingly

  1. English

    So i have to do this newspaper article about the lamb to the slaughter.. What would be a creative headline.. this is the situation i am doing it on.. The seemingly unsolved murder of Patrick Maloney is reported .

  2. math

    cost price of article a is 100 more than cost price of article b. article a was sold at 40% profit and article b at 40% loss.if overall profit earned after selling both the articles is 5%,then what is cost price of article b? 1)

  3. English help

    the date, time, and location of a robbery would most likely be included in? A feature article an editorial article a hard news article a letter to the editor I thought a featured article but really not sure

  4. Corporate Finance

    Jason's opportunity cost rate is 8 percent compounded annually. How much must he deposit in an account today if he wants to receive $5,400 at the end of each of the next 10 years? Use a financial calculator to determine the amount

  1. Economics

    I think I get this but could use some guidance to make sure, I am having problems with 2e). 1)In an article about the financial problems of USA Today, Newsweek, reported that the paper was losing about $20 million a year. A Wall

  2. English

    Identify the error in this works-cited entry for a print article in a magazine with no author. "The Hunger Problem in America," Newsweek. 15 Jun. 2007. p. 76. incorrect punctuation between elements incorrect order of elements

  3. math - probability

    Assume that there are 7 different issues of Newsweek, 8 different issues of Time, and 4 different issues of Sports Illustrated, including the December 1st issue, on the rack. You choose 4 of them at random. (1) What is the

  4. American Government

    Describe the problems that surfaced under the Articles of Confederation (8-10 problems we discussed in class) soon after the Revolutionary War. Use these problems and give a brief overview of Article I, II, III, IV, V, VI and the

You can view more similar questions or ask a new question.