Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Chapter 11, Problem 11PAA
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You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 40 percent of your revenues, which grow about 2 percent annually. You recently received a preliminary report that suggests the growth rate in ebook readings has leveled off, and that the cross-price elasticity of demand between paper books and ebooks is -0.3. In 2016, your company earned about $600 million from sales of ebooks and about $400 million from sales of paper books.
If the own price elasticity of demand for paper books is -2, how will a 4 percent decrease in the price of paper books affect your overall revenues from both paper books and ebooks sales?
(Enter your response rounded to one decimal place.)
Your overall reveues will change by $____ million.
You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 40 percent of your revenues, which grow about 2 percent 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 −0.3. In 2019, your company earned about $600 million from sales of ebooks and about $400 million 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 4 percent decrease in the price of paper books affect your overall revenues from both paper books and ebooks sales?
Instruction: Enter your response rounded to one decimal place.
Your overall revenues will change by $
You are a manager in charge of monitoring cash flow at a major publisher. Paper books comprise 50 percent of your revenues, which grow about 2 percent 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 −0.4. In 2019, your company earned about $500 million from sales of ebooks and about $500 million from sales of paper books. If your data analytics team estimates the own price elasticity of demand for paper books is −3,
how will a 2 percent 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.
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Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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