In the 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

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07.07.2022 - 19:22

In the 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

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In the 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 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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Almeta April 13, 2023 в 22:45

The implicit assumption that the publisher is making is that the demand for USA Today is highly elastic, meaning that even a small increase in price could lead to a significant drop in circulation. The implicit assumption that the analyst is making is that the demand for USA Today is relatively inelastic, meaning that a price increase would not have a significant impact on circulation and would result in a significant increase in revenue. Both assumptions depend on the concept of price elasticity, which is the measure of how sensitive demand is to changes in price.

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