Analysis of Price elasticity & price increase - implicit assumptions made by the publisher regarding the decision for increasing the price
In an article about the financial problems of the 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 to .75, 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 the price increase, citing that the wall street journal's experience after it increased its price to .75. Illustrate what implicit assumptions are the publisher and the analyst making about price elasticity.