The Price of a New Textbook Increases from $120 to $160

question 163

Multiple Choice

The price of a new textbook increases from $120 to $160, while the price of used copies of the textbook increased from $80 to $100. Other things being equal, we would expect

• A)the quantity demanded of the used textbook to increase and the quantity demanded of the new textbook to decrease.
• B)the quantity demanded of both to fall.
• C)the demand for the new textbook to increase and the demand for the used textbook to decrease.
• D)the quantity demanded of the used textbook to decrease and the quantity demanded of the new textbook to increase.

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Definitions:

Principle Amount

The original sum of money borrowed in a loan or the initial amount of investment before interest or profit.

Equity

The value of an ownership interest in property, including shareholders' equity in a corporation, representing the residual value to shareholders after debts and liabilities have been settled.

Private Placement

The sale of securities to a relatively small number of select investors as a way of raising capital.

Angels

Affluent individuals who provide capital for business start-ups, often in exchange for convertible debt or ownership equity.