Price Elasticity Can Work by Mike - Article Example

The paper "Price Elasticity Can Work by Mike Masnick" is a perfect example of an article macro and microeconomics. Based on our work (macroeconomic topic), I chose to review an article that was published by the Techdirt website. The article’s title is Price Elasticity Can Work: Dropping Ebook Price To $1 Catapulted Year-Old Book onto NYT Best Seller List. It was published on Tuesday, November 5th, 2013. The articles size is a page long (organized in two paragraphs) and it is located on the case studies section of the Techdirt website.

The author of the article is Mike Masnick, the founder & CEO of Floor64 & Techdirt blog editor. He can be contacted on twitter at http://www.twitter.com/mmasnick (Mike, 2013).  The article is about the reduction of the e-book price that led to increased sales hence increased revenues for Year-Old Book. Previously, the book had been out for more than a year. This forced Random House to do some pricing experiments in order to gain maximum sales from this product. It worked exactly as it was intended.

This book which had lost its market place for more than 14 months earlier rebounded in the New York Times bestseller list. It took the 22nd spot on the e-book fiction list. This confirms that the e-book product is price elastic. Although Random House initially thought that ‘sky-high prices’ for e-books made sense, their recent price experimentation proved otherwise since the move led to increased e-book sales compared to the earlier periods. In this article, the author focused on informing the reader about how Year-Old Book changed its pricing policy in order to test its effect on e-book sales.

This move was aimed at making the product affordable through lowering its market price hence attracting more customers. The fact about this movie is that it worked exactly as it was intended i.e. it led to increased demand for e-book product hence increased sales. This is a perfect example of a price elastic product. E-book product is a normal good which response perfectly to price changes. If its price is reduced, its demand increases and vice versa. In my own opinion, the author of the article did a good job.

In his work, he informed his reader about the price elasticity of e-books of the Year-Old Book in just a single page. He analyzed the present performance of e-books in the market and compared it to that of the previous years. He proved that the variance in the performances was due to the different pricing strategies. It is an article flowing ideas which are also easy to read. The information it contains is very logical and poses no further questions. This article fits the pure competition market model where there are many sellers in the market.

In such a case it is not possible for a seller to control its market price. They are solely determined by the market forces of demand and supply. Random House cannot increase its e-book price because by so doing it will affect its demand negatively. In such a model, there are many buyers and this is also the case for Random House. Furthermore, there is free entry and exit of buyers and sellers of e-books.