In yet another absurd chapter of an absurd story that has inspired a firestorm of poorly thought-out spin, Amazon has had to do basic profit analysis to explain to the bumbling Hachette why higher prices do not necessarily mean more profit, more pay for authors, or more books for readers.

According to Amazon’s analysis, the basic problem with the thinking of Hachette (and the other traditional publishers with whom they conspired in 2010 to illegally raise ebook prices) is that it doesn’t figure in the effect of price on demand.

You know, week one of Economics 101.

[F]or example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000.

That’s not only more money for Amazon and Hachette, that’s more money for authors and more books for readers. Now, the real question is whether Amazon can turn that analytic expertise into a bottom line with less red in it.