QUESTION 2

Some publishing companies make money from reprinting classic novels such as Romeo and Juliet, The Great Gatsby and Animal Farm. The publisher knows that a reprinted novel sells, on average, 2000 copies in Australia at a price of $6.99. They also estimate the point elasticity of demand for reprinting classic novels to be 4 (in absolute terms). The publisher decides to sell a comparable reprinted edition of Robinson Crusoe for $6.49.

Which of the following statements are true:

The point price elasticity of demand for the reprinted novel must be inelastic along the entire demand curve.

A 1% decrease in the price of a reprinted novel will lead to a 4% decrease in the quantity demanded.

The estimated quantity of Robinson Crusoe novels sold at a price of $6.49 is 2,572 (nearest whole number).

The estimated quantity of Robinson Crusoe novels sold at a price of $6.49 is 2,006 (nearest whole number).