IntroductionWill Bury is currently working on providing a way to digitize books. The production of the process is currently in the beginning stages. Will is working on this project by himself. It takes one hour to digitize 500 pages. He is considering hiring somebody to help speed up the process. He must now consider how much labor is going to be if he does hire an assistant. If he hires somebody in the United States, he may have to pay $10 an hour. If he decides to go with labor from overseas, he will incur a cost of approximately $2 an hour. Readings from Week One of this course provided information regarding price changes due to substitute products, price elasticity of demand and price changes due to fees.
Price Changes Due to Substitute ProductsA substitute product is something that may have the same qualities, but may have a lower cost.
It is necessary that Will Bury research his product to see if there are any substitute products available. Currently he sells his 500 page digitized book for $20 and $25. If there is a substitute product selling at lower price, he has a couple of choices. The first is to lower his price and try to compete on price. The second is to leave the price the same but demonstrate that there is added value to his product. If he chooses not to change his price, he will need to determine at which price and quantity he can continue to stay in business and not fail.
Price Elasticity of DemandPrice elasticity of demand is the measure of responsiveness in the quantity demanded for a commodity as a result of change in price of the same commodity. It is a measure of how consumers react to a change in price. One...