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Price elasticity of demand

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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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Solution lists the implicit assumptions about elasticity in the given scenario.

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Wall street analyst said that an increase in price will increase total ...

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  • MSc (Hons) , Birla Institute of Technology and Science, India
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