Daily News: Demand Elasticity: Sensitivity of Price Elasticity

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The case of Daily Mirror is an example of price elasticity of demand from the perspective of practical implementation. The company’s current management is increasing the price of tabloid newspapers. One needs to understand that the given industry or product is not as elastic as it might seem. Despite having a large number of substitutes, Daily Mirror can continue utilizing its strategy due to customer loyalty, willingness to pay, and proportional insignificance. Therefore, it should continue with a gradual price increase in order to find the point of highest returns.

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Daily News: Demand Elasticity

The elasticity of supply and demand is one of the most important categories of economic theory. Evaluation of elasticity in terms of price, income, and a number of other parameters allows one to choose the right strategy for behavior in the economic market. Therefore, the concept of elasticity is of great importance for producers of goods, as it provides an answer to the question of how much the volume of supply and demand will change when prices change. The case study Daily Mirror is an illustration of demand elasticity from a company’s perspective on the issue.

Price Elasticity of Demand Issues

Daily Mirror was the company, which started the price war by aggressively cutting the value by a significant margin. The current management and leadership are reversing the strategy by focusing on increasing the price tag in order to be more profitable. One of the major issues raised in the case is the demand elasticity of a particular product of tabloid newspapers. It is stated that the elasticity of a product or service in regards to price remains relatively constant over long periods of time (Miller and Alberini, 2016). Another study indicates: “Despite the increase in price, about two-thirds of print readers remained loyal to a product that has become much more expensive and is considered dying by many. Further analysis on the price elasticity of demand indicates that demand for the print product remains inelastic, which explains why so many newspapers implemented price hikes to increase circulation revenue” (Chyi and Tenenboim, 2019, p. 2119). In other words, it is evident that the Daily Mirror’s strategy might a plausible and effective one, but it is not clear whether it will be sustainable in the long term.

Another factor that needs to be taken into account is the circulation of the product within the market and its direct dependence on elasticity. It is stated that the circulation-based inability to subsidize readers due to a decline in advertisers can be the main reason for the price increase (Pattabhiramaiah, Sriram and Sridhar, 2018). Elasticity is one of the most important categories of economics, and it represents the percentage change in one variable in response to the percentage change in another variable. The concept of elasticity makes it possible to determine how the market adapts to changes in its factors. It is usually assumed that the firm has the opportunity to increase the proceeds from its sale by raising the price of its products. A situation is possible when a price increase will not lead to growth, but, on the contrary, to a decrease in revenue due to the decline in demand and a corresponding reduction in sales.

With an increase in prices for the company’s products, one can expect, other things being equal, a decrease in demand for it, while the vigorous activity of competitors producing substitute products and selling them at lower prices can also lead to a reduction in the need for the company’s products. At the same time, as the income of the population grows, the company can count on the expansion of consumer demand and, accordingly, an increase in sales of the offered products.

A product is considered inelastic if consumers are willing to buy the good regardless of price. The tabloid newspaper is an example of an inelastic trend, and loyal customers who need current awareness and correct journalism will continue to pay almost any fee for it. Products are considered resilient if consumers are willing to buy the product as prices rise. The restaurant industry is an example of product elasticity because most consumers will eat less in restaurants if the menu price increases. It is important to note that there are several factors that affect elasticity. Substitutes need to be considered because when there is more product, the elasticity is higher. Consumers can easily switch to other products in response to price changes. In this regard, the Daily Mirror business can be called elastic, as there are many options to choose from, as well as the ability to use the Internet.

Conclusion

In conclusion, Daily Mirror’s case is an interesting exploration of the market price elasticity. Although the presence of multiple substitutes increases the given factor, other ones, such as willingness, the proportion of income, and loyalty, decrease it. In other words, the company should continue to gradually increase its price by tracking the general readership. Daily Mirror needs to achieve the spot, where it sets the highest possible price without hindering the willingness to pay.

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Reference List

Chyi, H. I., and Tenenboim, O. (2019) ‘Charging more and wondering why readership declined? A longitudinal study of U.S. newspapers’ price hikes, 2008–2016’, Journalism Studies, 20(14), pp. 2113-2129. Web.

Miller, M., and Alberini, A. (2016) ‘Sensitivity of price elasticity of demand to aggregation, unobserved heterogeneity, price trends, and price endogeneity: evidence from U.S. Data’, Energy Policy, 97, pp. 235-249. Web.

Pattabhiramaiah, A., Sriram, S. and Sridhar, S. (2018) ‘Rising prices under declining preferences: the case of the U.S. print newspaper industry’, Marketing Science, 37(1), pp. 1-175. Web.

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BusinessEssay. (2022, June 12). Daily News: Demand Elasticity: Sensitivity of Price Elasticity. Retrieved from https://business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/

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BusinessEssay. (2022, June 12). Daily News: Demand Elasticity: Sensitivity of Price Elasticity. https://business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/

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"Daily News: Demand Elasticity: Sensitivity of Price Elasticity." BusinessEssay, 12 June 2022, business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/.

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BusinessEssay. (2022) 'Daily News: Demand Elasticity: Sensitivity of Price Elasticity'. 12 June.

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BusinessEssay. 2022. "Daily News: Demand Elasticity: Sensitivity of Price Elasticity." June 12, 2022. https://business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/.

1. BusinessEssay. "Daily News: Demand Elasticity: Sensitivity of Price Elasticity." June 12, 2022. https://business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/.


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BusinessEssay. "Daily News: Demand Elasticity: Sensitivity of Price Elasticity." June 12, 2022. https://business-essay.com/daily-news-demand-elasticity-sensitivity-of-price-elasticity/.