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------------------------------------------------ Demand for News Kids. Consider the market for newspaper delivery kids in Kidsville. Each news kid receives a piece rate of ���$22 per subscriber per month and has a fixed territory that initially has 200 subscribers.

How much is the monthly income of a typical news��� kid? ���(Enter your response as an��� integer.)

Suppose the new city council of Kidsville passes a law that establishes a minimum piece rate of $3 per subscriber per month. As a result, the publisher increases the monthly price of a subscription by 20%. The price elasticity of demand for subscriptions is 2.0.

Now, how much is the monthly income of a typical news kid? $_________

Answer :

The monthly income of a typical news kid after the price increase is $360.

To calculate the monthly income of a typical news kid before and after the price increase, we need to consider both scenarios.

Initial Scenario (Before the price increase):

Piece rate per subscriber per month: $22

Number of subscribers in their territory: 200

Monthly Income before the price increase = Piece rate × Number of Subscribers

Monthly Income before the price increase = $22 × 200 = $4,400

Scenario after the price increase:

New minimum piece rate per subscriber per month: $3

Price increase percentage: 20%

The price elasticity of demand (PED) is 2.0, which means that for a 1% increase in price, the quantity demanded will decrease by 2%.

In this case, the price increased by 20%, calculate the percentage decrease in quantity demanded using the PED formula:

PED = (% Change in Quantity Demanded) / (% Change in Price)

2.0 = (% Change in Quantity Demanded) / 20%

% Change in Quantity Demanded = 2.0 × 20% = 40%

This means that the quantity demanded decreased by 40% due to the price increase.

Now, let's calculate the new number of subscribers a typical news kid has after the price increase:

New Subscribers = Initial Subscribers - (% Change in Quantity Demanded × Initial Subscribers)

New Subscribers = 200 - (0.40 × 200) = 200 - 80 = 120 subscribers

Monthly Income after the price increase = Piece rate × New Subscribers

Monthly Income after the price increase = $3 × 120 = $360

So, the monthly income of a typical news kid after the price increase is $360.

To know more about monthly income:

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