Jill Borts Believes That the Price Elasticity of Demand for Her

question 139

Multiple Choice

Jill Borts believes that the price elasticity of demand for her economics textbook is relatively inelastic.She argues "I was told I had to purchase a book written by Hubbard and O'Brien that is required by my instructor.If I wanted to buy a mystery novel I would have many authors to choose from.Therefore, the demand for mystery novels is more elastic than the demand for my textbook." Is Jill correct?

• A)The demand for the textbook is more inelastic, but Jill's reasoning is incorrect. The reason the textbook has an inelastic demand is that it is more expensive than any novel.
• B)She is correct.
• C)She is confused. She should have concluded that the textbook has a more elastic demand than a novel.
• D)She is correct that the textbook has a more inelastic demand, but that is because most students pay for their textbooks with credit cards. Most people pay for novels and other books with debit cards.

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Definitions:

Average Product

The output per unit of input, such as the quantity of goods produced per unit of labor.

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may decrease.

Labor Input

The amount of work contributed by employees, measured in hours or effort, used in the production of goods and services.

Ceteris Paribus

A Latin phrase meaning "all other things being equal," used in economics to isolate the relationship between two variables by holding other relevant factors constant.