Jill Borts Believes That the Price Elasticity of Demand for Her

question 183

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 or debit cards. Most people pay for novels and other books with cash or by check.

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Definitions:

Net Taxes

The difference between taxes paid to the government and transfer payments received from the government.

Circular Flow

An economic model that depicts how money moves through an economy between producers and consumers, illustrating the interactions between different sectors.

Injections

In economic terms, it refers to the introduction of income into the flow of the economy through investment, government spending, or exports.

Consumer Price Index (CPI)

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to estimate the cost of living.