New York Times vs. Adam Smith

Anyone who has ever taken an economics course knows the basic rules of supply and demand.  When demand is high and supply is fixed, prices rise.  Likewise, when demand falls and supply remains unchanged, prices fall.  Given these basic rules of economics, one would assume that the newspaper industry would be cutting prices given the continued decline in their circulation rates.  Last week, the Audit Bureau of Circulations announced that newspaper circulation in the six months ending March 31st declined by 7%, which was an acceleration of the declines seen over the last two reporting periods.

Less than one week after these figures were released, however, The New York Times seems to think that the answer to weaker demand is higher prices.  This morning, the Financial Times is reporting that the Times will raise the price of its Monday - Saturday editions to $2.00 (from $1.50) and the price of its Sunday paper to $6 (from $5).  Higher Prices = Higher Demand?  Adam Smith must be rolling over in his grave.

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Comments

[Trent Baur]

Try inelastic demand. Maybe the NYT went beyond the basic economics course.

C'mon, Bespoke, you're better than this kind of ignorant snarky posting.

[Greg Feirman]

Seriously, this could work. Some people have to have their paper NY Times. Their demand is inelastic like Trent wrote.

[Paul Hickey]

It's hard to say that demand is inelastic when circulation has been in decline for years now.

[Colin]

I think you might be confusing a shift in the demand curve down with price elasticity.

As the two previous commenters noted, demand from buyers is likely inelastic, but overall demand is shifting down. This is a basic profit maximization problem.

The shift in the demand curve inwards is just a reality of print media, not an elasticity issue.

[F. Mills]

This is why the Times supports liberals who believe that when revenues to the Treasury are down, it's time to raise taxes. Won't help. What really works is to lower taxes, people and business keep more, the economy grows, jobs increase, and revenues to the Treasury increase.

[Adam Smith]

Bespoke...I would pull this post before it undermines the perceived quality of the rest of your work...I'm a premium subscriber.

For f.mills and paul hickey I will spare your Walmart shopping Limabaugh listening brains all this confusing talk of "elasticity" and "shifting demand" and heaven forbid any math.....Would the New York Times be wise to raise its price to 1 billion if it could keep 100 subsribers?Talk about a great demographic for ad sales!