A newspaper recently lowered its price from 55 cents to 50 cents. As it did, the number of newspapers sold increased from 310,000 to 350,000. a. What was the newspaper’s elasticity of demand? Instructions: Enter your response rounded to two decimal places. Price elasticity of demand: b. Given that elasticity, did it make sense for the newspaper to lower its price? Demand is so it make sense to lower the price because it total revenue. c. What would your answer be if much of the firm’s revenue came from advertising and the higher the circulation, the more it could charge for advertising?

Explanation:

Given the following;

Quantity 1 = 310,000

Quantity 2 = 350,000

Price 1 = $0.55

Price 2 = $0.50

A.) Elasticity of demand:

%(change in quantity) ÷ %(change in price)

% change in quantity= ((350000 - 310000) /310000) × 100 =

= ((40000)/310000) × 100 = 12.9%

% change in price = ((0.50 - 0.55) / 0.55) × 100 = (-0.05 ÷ 0.55) × 100 = 9.1%

Elasticity of demand = (12.9% ÷ (-9.1%)) = - 1.42

B.) Yes, lowering the price made sense, as it has increased the revenue of the newspaper company.

C.) If the firm's revenue is based on advertising which is dependent on rate of circulation, then I will approve the move of the firm, as the move to lower the price has increased the quantity demanded which means higher circulation and ultimately higher revenue from advertisement as a lot of people wants publications that are far reaching.

answer; the inspector may have found some violation that could cause death or some kind of serious injury;

reducing the scale of the market for a new product.