Answer to Question #231448 in Microeconomics for Ewura-Esi

Question

In an article about the financial problems of Daily Graphic, an economists at Valley View University indicated that the company was losing about GHC20 million a year. The economist suggest that, paper should raise its price from GHC2.5 to GHC3.5 which he estimated would bring in an additional GHC65 million a year. The paper's publisher rejected the idea, saying that the circulation could drop sharply after a price increase, citing The Ghanaian Times experience after it increase its price to GHC3. What implicit assumption are the publisher and the economist making about demand elasticity? 

Answer 1

-Self-interest: Everybody else wants to make decisions that will provide them the most pleasure.

-Costs and rewards: Every option is made by weighing the intrinsic costs and economic advantages of each option.