Elasticity and Journal Pricing

Abstract

Over the last ten years, academic libraries have begun to spend nearly half of their annual budgets on journals. This figure has risen from an earlier 28% share at the same time that total library budgets have quadrupled. What is the cause of such a trend? This article deals with the economic concepts of elasticity and inelasticity of demand as applied to academic journal prices and explains how a strong demand for a product will cause nearly the same quantity to be purchased despite increases in price. Having recognized this, journal publishers are able to increase their total revenue by raising prices and betting correctly that the lessening in demand will be slight. Having defined the issues, the authors suggest econometric studies as a means of dealing with them.