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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