Book Publishers Often Use Price Discrimination Across Time to Increase

question 117

Essay

Book publishers often use price discrimination across time to increase profits.Toni Morrison's book, A Mercy, was published as a hardcover edition in November 2008 at a price of $23.95.In August 2009, the paperback version was published at a price of $15.00.Assume that 100,000 hardcover books were sold to hard-core Toni Morrison fans in November 2008, and 400,000 paperback books were sold to casual readers in August 2009.Illustrate each of these situations graphically.Assume that the marginal cost of the hardcover version is $2.00 and the marginal cost of the paperback version is $0.75.

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Definitions:

Break-even Point

The point where total costs and total revenues are the same, leading to neither profit nor loss in sales or production levels.

Sales Dollars

The overall income earned from the sales of products or services, measured in currency.

Break-even

The point at which total costs and total revenue are equal, resulting in no profit or loss for the business.

Variable Cost

Outgoings that are directly influenced by how much is produced or sold, including the costs of labor and materials.