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Demand is Driving High Costs of Textbooks

I agree that the high costs of textbooks is partly the result of the fact that students are willing to pay so much ["Exorbitant Prices for Textbooks Have No Justification," Feb. 7].

In economics, this situation is called an inelastic demand. The price of the textbook is quite a negligible function of the cost of production, but it is in fact very heavily dependent on the inelastic nature of the demand curve.

Here's an empirical example: I got the same Principles of Microeconomics (14.01) text by Rubinfield and Pinyck in Malaysia for the price of $20. The price at The Coop is $70. The one I got in Malaysia is the exact same U.S. edition and hardcover. There are many other examples, and the general case seems to be that textbooks in the United States usually cost about three times more than they do in foreign countries.

The demand for textbooks in a country like Malaysia is not so elastic because students often resort to photocopying if the price is too high. It makes sense for the publishing company to charge different prices for both countries; since the mobility of the textbooks across different geographical markets is low, the companies are able to separate the markets.

More information on this can be found in the 14.01 text under appendix: price discrimination.

Beng-Teck Lim '98