Question
You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 60percent of your revenues, which grow about 2percent
You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 60percent of your revenues, which grow about 2percent annually. You recently received a preliminary report that suggests the growth rate in ebook reading has leveled off, and that the cross-price elasticity of demand between paper books and ebooks is 0.5. In 2019, your company earned about $400million from sales of ebooks and about $600million from sales of paper books.
If your data analytics team estimates the own price elasticity of demand for paper books is 2, how will a 3percent decrease in the price of paper books affect your overall revenues from both paper books and ebooks sales?
Instructions: Enter your response rounded to one decimal place.
Your overall revenues will change by $ _______ million.
(PLEASE ANSWER QUICKLY)
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