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MIZZ
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#1
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#1
Hey i need help with a question... im really stuck
it's to with elasticities: Income Elasticity of Demand/ Cross Elasticity of Demand/ Price Elasticity of Supply

Question: A newspaper company is considering diversigying by buying a smaller book publishing company
Discuss (a) whther books have a better long term sales future then newspapers
(b) whether the newspaper side of the company might soon be less important then the book publishing side

any help appreciated
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PQ
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#2
Report 16 years ago
#2
(Original post by MIZZ)
Hey i need help with a question... im really stuck
it's to with elasticities: Income Elasticity of Demand/ Cross Elasticity of Demand/ Price Elasticity of Supply

Question: A newspaper company is considering diversigying by buying a smaller book publishing company
Discuss (a) whther books have a better long term sales future then newspapers
(b) whether the newspaper side of the company might soon be less important then the book publishing side

any help appreciated
http://www.tutor2u.net/revision_note...asp#elasticity
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MIZZ
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#3
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#3
Thanks for the link Pencil Queen
I understand elasticities...
i just don't know how to approach the question... i can see no link in what they are asking and elasticities... and i haven't the faintest idea about newspaper and book sales
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Vienna
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#4
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(Original post by MIZZ)
Hey i need help with a question... im really stuck
it's to with elasticities: Income Elasticity of Demand/ Cross Elasticity of Demand/ Price Elasticity of Supply

Question: A newspaper company is considering diversigying by buying a smaller book publishing company
Discuss (a) whther books have a better long term sales future then newspapers
(b) whether the newspaper side of the company might soon be less important then the book publishing side

any help appreciated
elasticity will help you make decisions regarding the pricing and marketing strategy of the books and papers. by comparing the elasticities with your target audiences you can make judgements based on the market performance of both. are newspapers and books compliments(ppl who read the paper will be attracted by the offer of books aswell) or substitutes(they will buy books instead)?
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MIZZ
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#5
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#5
the figures i have show household expenditure on books and newspapers by decile group. So i could work out income elasticity or just compare the expenditures...
but what i DONT see is how thats gonna help me determine whether in the long term books have a better sales future
and whether the newspaper side of the company might soon be less important then the book publishing side
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Vienna
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#6
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(Original post by MIZZ)
the figures i have show household expenditure on books and newspapers by decile group. So i could work out income elasticity or just compare the expenditures...
but what i DONT see is how thats gonna help me determine whether in the long term books have a better sales future
and whether the newspaper side of the company might soon be less important then the book publishing side
comparison of the income elasticities and cross-price elasticity. the fluctuation in demand against price etc. you cant determine whether there will be a better sales future based on this alone, but it helps to show the change in revenue that will occur in one product for demand in the other.
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MIZZ
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#7
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would u say books and newspapers are complements or substitutes
to me they seem like neither
so that would mean i cant use cross elasticity
hmmmmm
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Vienna
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#8
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(Original post by MIZZ)
would u say books and newspapers are complements or substitutes
to me they seem like neither
so that would mean i cant use cross elasticity
hmmmmm
they could be both.
people who read books could also read newspapers. they could also not read newspapers as a result of reading books. that is the point of the exercise from the way you have explained it, how will books effect the sales of newspapers.
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MIZZ
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#9
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so far my answer is
as income goes up the book making side will profit more than the newspapers as books are more income elastic than newspapers, and vice-versa if the income decreases then newspapers won't be affected as much but the profitability of books will drop.
Books may overtake newspapers as company might decide that as incomes go up, books become more in demand than newspapers, so they would profit more from book publishing.

now im thinking of mentioning cross elasticity... but if books and papers are subs and compl. it makes it very confusing for me :s

oh and i was also able ot work out from the figures provided the income elasticity....
books were elastic
and newspapers inelastic

i have no 'change in price' figure to work out cross elasticity
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MIZZ
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#10
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ne 1 else?
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MIZZ
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#11
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