Free London Evening Standard – Price elasticity of demand

Here is an extreme case of price elasticity of demand. The London Evening standard is to axe its 50p cover price and become a free newspaper. They have realised that many people are reluctant to hand over a 50p charge when they have plenty of other things to entertain and inform – not least the emergence of mobile phones which can surf the internet. This is a great example of how lots of substitutes increases a products PED. Click read more for a mnemonic to help remember factors that influence PED and some GCSE style questions on the topic.

Factors that influence PED

SPLAT

Substitutes
Percentage of income
Luxury or Necessity
Addiction
Time

1. Explain what has caused demand for evening newspapers to become price elastic. (3 marks)

2. Calculate the price elasticity of demand for the London Evening Standard using the information below

Old Price - 50p New Price - Free Old quantity demanded -250,000 New quantity demanded – 600,000 (4 marks)

3. Explain how the London Evening Standard will make money, despite giving their newspaper away for free. (2 marks)