$5.00 BUS 640 - Managerial Economics
Chapter 6 - Applied Problem 1
In an article about 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 rais tis price from 50 cents to 75 cents, whihc he estiamted would bring in an additional $65 million a year. The papers' publisher rejected the idea, saying that circulation could drop sharply after a price increase, citing Wall Street Journal's experience after it increased its price to 75 cents. What implicit assumptuions are the publisher and the analyst making about price elasticity?