Description of applications of price elasticity of demand


In 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 must raise its price from 50 cents to 75 cents, which he estimates would bring in an additional $65 million a year. The paper's publisher rejected the idea saying that the circulation could drop sharply after a price increase, citing The Wall Street Journal's experience after its increased its price to 75 cents What implicit assumptions are the publisher and the analyst making about price elasticity?

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Microeconomics: Description of applications of price elasticity of demand
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