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:

Net Operating Income

A company's total profit from operational activities, excluding expenses related to interest and taxes.

Period Cost

Expenses that are not directly tied to production activities and are expensed in the period in which they occur.

Contribution Margin

The difference between the sales revenue of a product and its variable costs, used to cover fixed costs and contribute to profit.

Variable Costing

An accounting method that only assigns variable costs to inventory, treating fixed costs as expenses in the period they are incurred.