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.

Understand the strong and weak axioms of revealed preference and their application to consumer choice.

Comprehend how changes in prices and income affect consumption choices under different circumstances.

Analyze the impact of exchange rate fluctuations and futures contracts on individual financial welfare.

Understand the calculation and interpretation of Laspeyres and Paasche price indices.

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