This article from the WSJ reports that Amazon is increasing the price of its Prime service from $79/year to $99/year. It is a good introduction to pricing, elasticity, and behavioral economics.
If the does not work, conduct a Google search on the title.
SUMMARY: Amazon plans to raise the rate for Prime membership to $99 a year from $79, the first price increase for the shipping and video-streaming service. The Seattle retailer said the 25% increase was needed to offset rising delivery and content-acquisition costs. As a result of the 25% price increase, "analysts said they expect fewer than 10% of the more than 20 million Prime members to drop their accounts."
CLASSROOM APPLICATION: Instructors can use the article to present the price elasticity of demand for Amazon Prime services, and also present the reason Amazon is increasing the price of the service.
QUESTIONS:
1. (Advanced) According to the data presented in the article, what is the possible range of the price elasticity of demand for Amazon Prime?
2. (Introductory) Why is Amazon raising the price of its Prime service? Is it an increase in cost of providing the service or an increase in demand?
3. (Advanced) Under what condition would it be profitable for Amazon to price Prime at below the marginal cost of providing the service?
1. (Advanced) According to the data presented in the article, what is the possible range of the price elasticity of demand for Amazon Prime?
2. (Introductory) Why is Amazon raising the price of its Prime service? Is it an increase in cost of providing the service or an increase in demand?
3. (Advanced) Under what condition would it be profitable for Amazon to price Prime at below the marginal cost of providing the service?
labels= elasticity, pricing, behavioral economics
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