Price Rise at the Daily Mirror Case Study - Economics Assignment Help

Assignment Task:

Task:

Answer all the questions.
Q1. Price rise at the Daily Mirror (1500 words)
Sly Bailey, the Trinity Mirror Chief Executive, sought to boost revenues of the Daily Mirror in 2004 by increasing the price of the tabloid newspaper by 3p, from 32p to 35p. The move is a sharp U-turn of the policy of Philip Graf, her predecessor, who tried to boost Daily Mirror circulation by cutting the cover price, triggering a price war with its rivals The Sun and the Daily Star. Ms. Bailey ended the price war as soon as she took over at Trinity Mirror in 2003. The Daily Mirror will now cost 5p more than the The Sun, which is owned by News International, parent company of the Times. It appears that The Sun has no immediate plans to increase its price. The Daily Mirror last increases its price in September 1999 but the tabloid newspaper market in the UK is fiercely competitive and it’s not clear what the effect on its circulation will be.

Question:
1. What price elasticity of demand issues are raised in this case study?

(20 Marks)

 Introduction what is elasticity of demand
 Price of elasticity demand
 Cross price elasticity
 How to calculate
Body of the main answer;
 Change in quantity demanded of daily mirror divided by change in price sun multiply price in sun / quantity in daily mirror
 How the changes of one newspaper will affect the quantity demanded of the other newspaper
 Revenue of daily mirror will be effected (i.e it will decrease) bec. Sun may not follow the fall strategy of daily mirror

Q2. Data response Questions:
The demand and supply schedules of good X are given below in the table below.

(20 Marks)

Px ($) Quantity demanded

Quantity supplied
1 120 0
2 100 20
3 80 40
4 60 60
5 40 80
6 20 100
A) Define what is meant by the quantity demanded and the quantity supplied

Demand ,supply, law of supply, law of supply (chapter 4 in text book)

B) What is the equilibrium price and quantity?
Qd=qs
The quantity demanded = quantity supplied
Equilibrium is fixed by the intersection of demand and supply
C) What would be the excess demand or supply if the price were:
i. $2
ii. $6

D) If there was an increase in income and the product was an inferior good what would be the equilibrium price and quantity if 20 units less were demanded at each price?

 Changes in demand for an inferior product bec. Of a change in price
 When income increases, the demand on inferior products will dec. bec. Consumer can buy high quality product with increase income.

Price ($) Quantity demanded per week

Quantity supplied per week
20 20 0
40 16 4
60 12 8
80 8 12
100 4 16

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