A publisher initially prices both hardback books and paperback books at $30 per
ID: 1253127 • Letter: A
Question
A publisher initially prices both hardback books and paperback books at $30 per book. Each book costs $3 to produce.
Price
Quantity
Total Revenue
Total Cost
Profit
Hardback
$30
150
Paperback
30
150
Total
300
The price elasticity of demand for hardback is 0.6 and the price elasticity of demand for paperback is 3. Suppose the publisher increases the price for hardback by 10% and decreases the price of paperback by 10%. Complete the following table.
Price
Quantity
Total Revenue
Total Cost
Profit
Hardback
Paperback
Total
Price
Quantity
Total Revenue
Total Cost
Profit
Hardback
$30
150
Paperback
30
150
Total
300
Explanation / Answer
Price Quantity Total Revenue Total Cost Profit Hardback $30 150 $4500 $450 $4050 paperback $30 150 $4500 $450 $4050 total 300 $9000 $900 $8100 later on increase in demand of paperback would be 3 * 10 = 30 % = 45 decrease in demand of hardback would be .6 * 10 = 6% = 9 new quantity of paperback = 150 + 45 = 195 new quantity of hardback = 150 - 6 = 144 Price Quantity Total Revenue Total Cost Profit Hardback $30 195 $5850 $585 $5265 paperback $30 144 $4320 $432 $3888 total 239 $10170 $1017 $9153
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