Question
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
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?
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