According to an article in the New York Times, some small publishers have argued that Amazon has been increasing the prices it charges for their books on its Web site. Amazon was increasing the prices by reducing the discount it offered consumers on the retail prices of the books. One small nonfiction publisher said that Amazon had reduced the discount on its books from about 30 percent to about 16 percent. According to the author of the article: “For this publisher, that means less revenue and less profit as some buyers reject the more expensive books.”
a. Does the fact that some buyers will no longer buy the publisher’s books at a higher price necessarily mean the publisher will earn less revenue? Briefly explain.
b. What must be true about the price elasticity of demand for the publisher’s books for the author’s statement to be correct?