2.1. A newspaper article points out that the price of economics textbooks is up 10 percent this year over last year, and yet the number of textbooks sold is higher this year. The article claims that these figures show that the law of demand does not apply to text books. Is there a flaw in this argument?
The law of demand simply states that all things equal, the lower the price of a good the larger the quantity consumers wish to purchase. In this situation the price has gone up 10% and the number of text books sold has gone up as well--so there is a higher equilibrium price and higher equilibrium quantity (shown in blue). If the demand for books goes up--for example, because of an economic downturn where more people return to school because they cannot find a job the you would see an increase in quantity purchased. Therefore if you see an increase in students who desire purchasing textbooks you can see both an increase in textbook price and an increase in quantity sold.
Side question-- are the price of textbooks more inelastic than other books? If they are--could a smart textbook company increase the price in the midst of a recession to take advantage of increased government money going towards grants and subsidized student loans.
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