Question 1
The growing popularity of e-readers challenges established beliefs about the popularity of print books. An emerging consensus is that the e-readers advertised by Amazon, Barnes & Noble, and other companies are likely to become the beginning of an end in the publishing industry (Kolakowski, 2011). Under the influence of new technologies, the demand for print books will decrease dramatically, followed by the reduction in the supply of print editions. Market professionals predict that annual sales of print book will keep declining by 5 percent annually (Kolakowski, 2011). The main reason behind these changes is that print books are no longer considered as being convenient and cheap. E-readers provide a cost-effective alternative to print editions of the most popular books. Nevertheless, e-readers can open new venues for the development of the publishing industry, thus creating new demand-supply equilibrium.
Not all publishing industry players will experience problems and losses. Popular authors who are eager to capture the benefits of electronic information technologies will develop a strong competitive advantage in the publishing market. The supply of their products will increase, since e-readers will operate as the fourth platform for delivering non-published content, beyond mobile, print, and Web sources (Shields, 2009). At the same time, the number of readers (or consumers) in the publishing industry will also increase. For years, thousands of people had no time and opportunity to devote themselves to reading. E-readers facilitate the integration of reading activities into people’s daily routines. They make it easier for the publishing industry to compensate for the losses that result from the decline in print book sales. Kolakowski (2011) is right: most probably, the publishing industry will not be able to close the revenue gap that emerges as a result of the shifting market equilibrium. However, as demand for electronic books continues to grow, the publishing industry will have to adjust to the new features of supply and demand, as well as the new market equilibrium.
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Question 2
Price elasticity of demand is defined as a percentage change in the amount of the good or service being demanded by the customer against the percentage change in the price of this good or service (Boyes & Melvin, 2012). The extent to which the demand for goods and services is sensitive to changes in price depends on the following factors: the presence and diversity of substitutes, the quality of such substitutes, as well as the share of the total budget spent on the good or service and the time period to be considered (Boyes & Melvin, 2012). Essential foods (bread, milk, salt and sugar) represent some of the least elastic goods in terms of price. These food products take just a tiny share of the total budget. They have few substitutes, and they are important elements of my daily diet. Therefore, any slight changes in the price of these products will hardly change the amount of bread, milk or sugar I consume daily. However, “the longer the time period under consideration, the more elastic is the demand for any product” (Boyes & Melvin, 2012, p. 98). With time, I may switch to different bread, sugar, and milk suppliers, if the prices they charge for their products offer greater saving opportunities without compromising their quality.
When it comes to more expensive product and service decisions, such as vehicle purchase, traveling and vacations, or admission to college or university, price elasticity of demand becomes much higher even in a short-term perspective. In other words, even an insignificant increase in the price of these goods and services can change my purchase intentions. It is no secret that, when it comes to goods and services as expensive as overseas traveling or education, every change in price can become a decisive factor for a small budget. These products and services have a variety of substitutes, and they are not as important as foods and utilities. The market offers abundant product and service choices, making the demand for such goods and services extremely sensitive to price changes. In a long-term perspective, I will have more information, chances, and freedom to consider all possible product and service options and choose what best suits my needs and budget.
- Boyes, W. & Melvin, M. (2012). Microeconomics. Boston: Cengage Learning.
- Kolakowski, N. (2011). Kindle, Nook, other e-readers wrecking publishing industry: Report. E-Week. Retrieved from http://www.eweek.com/c/a/Desktops-and-Notebooks/Kindle-Nook-Other-EReaders-Wrecking-Publishing-Industry-Report-407632/.
- Shields, M. (2009). E-readers: Will they save the publishing industry? AdWeek. Retrieved from http://www.adweek.com/news/technology/e-readers-will-they-save-publishing-industry-100723.
