The price of a new textbook increases from $75 to $90 while the price of used copies of the textbook increases from $50 to $65. Other things equal, we would expect to observe
A) the quantity demanded of the used textbook to increase while the quantity demanded of the new textbook to fall.
B) the quantity demanded of both to fall.
C) the demand for the new textbook to increase while 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.

Question

Quizplus · Accepted Answer

The law of demand states that when the price of a good increases, the quantity demanded decreases. Therefore, we would expect the quantity demanded of both new and used textbooks to decrease. However, since the price of the used textbook increased by a smaller amount than the new textbook, we would expect the quantity demanded of the used textbook to decrease by a smaller amount compared to the new textbook. Therefore, we would expect the quantity demanded of the used textbook to decrease while the quantity demanded of the new textbook to increase.

The Price of a New Textbook Increases from $75 to $90