1. * 3.10 Warner Home Entertainment sold the Harry Potter and the Prisoner of Azkaban two-DVD movie set in China for about $3, which was only one-fifth the U.S.

price, and sold about 100,000 units. The price was extremely low in China because Chinese consumers are less wealthy and because (lower-quality) pirated versions were available in China for 72¢–$1.20, com pared to the roughly $3 required to purchase the legal version. Assuming a marginal cost of $1, what is the Chinese elasticity of demand? Derive the demand function for China and illustrate Warner’s policy in China using a figure similar to those in Figure 12.3. M