Exercise 4 - 2 Elasticity and Revenue: DVD Retail Example

As reported by the Financial Post, retail sales of items including DVD movies are in decline as they are being replaced by online providers of streaming digital media.

HMV Canada a leader in the DVD retail business is in the process of restructuring after being sold to Hilco UK a restructuring specialist.

Movies as a product are elastic in nature, a hypothetical retail DVD demand model is illustratrated in Figure 4 - 2A.



Figure 4 -2A

Figure 4 - 2B shows total revenue rising when price falls on the elastic part of demand curve and total revenue falling as a result of price falling on the inelastic part of the demand curve.

Figure 4 -2B

References: http://proquest.umi.com.libresources2.sait.ab.ca/pqdweb?index=19&did=2385781741&SrchMode=1&sid=1&Fmt=3&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1310520611&clientId=5337

Financial Post.  (2011, June 28). HMV sale raises doubt about future of music, DVD retailers. Telegraph-Journal,B.4.  Retrieved July 12, 2011, from Canadian Newsstand Core. (Document ID: 2385781741).