Suppose the absolute price elasticity of demand for magazine subscriptions is 1.5. In order to increase the total revenues from subscriptions, the publishers should
A) increase the price of the newsletters.
B) reduce the price of the newsletters.
C) sell the newsletters on the inelastic portion of its demand curve.
D) keep the price the same.

Question

Quizplus · Accepted Answer

When the absolute price elasticity of demand is greater than 1, it means that demand is elastic, which implies that a decrease in price will lead to an increase in the quantity demanded, resulting in higher total revenue. Therefore, reducing the price of magazine subscriptions would be the best choice to increase its total revenues.

Suppose the Absolute Price Elasticity of Demand for Magazine Subscriptions