Will Bury Economic Analysis
As the age of technology advances it is important to offer consumers new products that will enable them to make better use of their time. The idea of being able to go completely paperless with magazines and books and be able to have more of these products at your disposal in one device is the wave of the future.
Will Bury invented new technology that can digitalize books and would allow consumers an option of reading or listening to their books. He has proprietary technology and has a patent there for this technology is considered to be in a monopoly market, which blocks the entry of other firms. “Pure monopoly is a market structure in which one firm is the sole seller of a product or service. Since the entry of additional firms is blocked, one firm constitutes the entire industry (McConnell, Brue, & Flynn, 2009,). However, the books in which he would be digitalizing would fall into a monopolistic competition due to the fact that they are no longer under copyright.
According to Businessdictionary.com (n.d.), non-essential items are elastic and essential items such as food, clothing, medicine, etc. are considered inelastic. Bury’s new technology would be considered elastic because it is not considered a necessity. This is still a new business therefore a comparison of PED would be ineffective, prices should be increased on the newer books for a short period of time then reevaluate PED, price elasticity of demand.
Marginal Cost and Marginal Revenue
Pricing a product appropriately is very important in the market system; overpricing or underpricing a product can result in failure and closure of a business. It is optimal for marginal cost to equal marginal revenue, if marginal revenue is less than marginal cost a business will not be able to sustain itself and will result in closure (McConnell, Brue, & Flynn, 2009,). Because of this reason pricing changes need to be...