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 5 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 $900 million from sales of ebooks and about $600 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 1 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.
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 5 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 $900 million from sales of ebooks and about $600 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 1 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.
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 1.1P: (Calculating Price Elasticity of Demand) Suppose that 50 units of a good are demanded at a price of...
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Transcribed Image Text: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 5 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 $900 million from sales of ebooks and about $600 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 1 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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