Question

The publisher of a magazine gives his staff the following information:

Suppose that the publisher says, “If we raise our price to $3.00 per copy, we can break even next period.” What is the publisher assuming about the demand for its magazines?

a.None of these

b.The demand is perfectly elastic

c.The demand is inelastic but not perfectly inelastic

d.The demand is perfectly inelastic

e. The demand is elastic but not perfectly elastic

Answer 1

They are planning to raise their price that means their demand is not perfectly elastic. if it was perfectly elastic they could never raise the price. the break-even point is the point where TR=TC. here the publisher is assuming that they will increase the price but there will be very less change in the quantity of the book demanded. hence the demand should be inelastic. but they are also assuming that they could change the quantity sold. hence the demand is not perfectly inelastic too.

hence option c is the correct option here.