Economics
F.4C
Rosemarie Chiu (7)
Edith Hui (13)
A.
News Article
Price of school textbooks increases
7 April 2009, Costs rise under new academic system
The cost of textbooks under the new senior academic structure has risen, with some publishers
nearly doubling the prices for certain subjects.
The fewer subjects required to qualify for the future Hong Kong Diploma of Secondary
Education examination, which will replace the HKCEE, meant longer lesson times per subject,
which would translate into thicker textbooks, the Educational Publishers Association said.
Compulsory Form Four subjects under the new system, including Chinese, English language and
mathematics, registered an average increase of 8 per cent - with prices for English-language
textbooks rising 12.3 per cent.
The average prices in elective subjects such as geography (HK$401), physics (HK$510) and
economics (HK$414) have also gone up. Biology textbooks will cost an average of HK$476 - an
increase of 87 per cent on last year's HK$255.
The Education Bureau released the prices of books for senior secondary subjects yesterday after
assessing 152 sets of textbooks submitted by publishers.
A parent of a Form Four arts student will have to pay an average total of HK$2,638 for textbooks
in the forthcoming academic year, while that for a science student will amount to HK$2,849, the
association said.
The increases were due to curriculum changes in the new senior academic structure, said Elvin
Lee Ka-kui, the association's secretary.
Four subjects - Chinese, English language, mathematics and liberal studies - will become
compulsory, while two or three electives may be chosen from 20 subjects.
Mr Lee said publishing houses had to employ many extra staff to prepare the new set of
textbooks.
"There's an average 50 per cent increase in personnel," he said.
Shek Kwok-kei, the association's president and a publisher with Pilot Publishing Company, said it
was impossible to compare new senior secondary textbooks with those for the past academic
year.
"Students now have to take eight or nine subjects" for the Hong Kong Certificate of Education
Examination, Mr Shek said. "In the future, they just need to take six or seven subjects.
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"The decrease ... entails a longer lesson time, which means textbooks will be much thicker than
before. Take English as an example - the current number of teaching hours is 270, which will be
increased to 405 under the new structure. That's why the average number of pages for an English
textbook has risen from 432 to 1,700."
There was room for textbook prices to go down, said Cheung Kwok-wah, principal assistant
secretary in curriculum development with the Education Bureau.
"We have suggested cost-saving measures for publishers, such as using cheaper paper and
uploading activities onto the internet instead of printing them out," Dr Cheung said.
Connie Lau Yin-hing, chief executive of the Consumer Council, said publishers should refrain
from using luxurious methods, such as banquets, to promote textbooks.
Both Dr Cheung and Ms Lau said it was impossible to compare prices at this stage.
"We don't know how the schools will choose subject combinations," Ms Lau said.
"After the schools make their choices, we will do a study comparing their prices."
South China Morning Post
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B.
Summary of the article
The price of the new senior secondary textbooks has increased drastically.
C.
News Analysis
1
Market demand and supply
1.1
Change in supply
As mentioned in the news article, publishing houses had to employ many extra staffs and
experts to prepare the new set of textbooks. Besides, fewer subjects meant longer lesson
times per subject, so thicker textbooks are needed. This means more paper will be used in
producing the new textbooks. Labor and paper are factors of production as further
explained in section 2.2 below.
Production cost of each book therefore increases, resulting in a decrease in the supply for
textbook (from S1 to S2). This leads to an increase in price (from P1 to P2).
1.2
Elasticity of demand determines the change in revenue
Students must use a textbook when they go to school. The degree of necessity is high.
The demand for textbooks is therefore inelastic. If the suppliers raise the price (from P1
to P2), the quantity demanded decreases (from Q1 to Q2). The percentage increase in
price is greater than the percentage decrease in quantity demanded. The gain is thus
greater than the loss. Therefore, revenue increases. The profit of the suppliers, which is
equal to revenue – production cost, however cannot be determined because the extent of
the increase in production costs is uncertain. If the increase in cost is greater than the
increase in revenue, profit decreases; if the increase in production cost is smaller than the
increase in revenue, profit increases; whereas, if the increase in production cost is equal
to the increase in revenue, profit remains unchanged.
2
The Suppliers — the text book companies
2.1
Types of Production
The production of textbooks is a secondary production. It turns paper, which is a raw
material, into textbooks.
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It has to depend on tertiary production provided by other business sectors, such as drivers
to transport the textbooks from press factory to retail shops; retailers to provide retail
services and banks to collect sales revenue from customers paying by credit cards.
It also has to depend on primary production, for example, lumberman to obtain timber to
make papers.
The company also depends on other secondary production in its production process, for
example, production of trucks for the delivery of textbooks.
2.2
Factors of Production
2.2.1
Entrepreneur
The shareholders of the company are entrepreneur. Entrepreneur has a risk-taking role.
Entrepreneur is one of the human factors of production. He/she makes decisions for the
business as a whole.
2.2.2
Labour
The new experts or staffs referred to in the news article are classified as labour. Labour is
the human effort involved in production of new textbooks. The experts and workers are
occupationally immobile. So when their skills become obsolete, they face the risk of
unemployment.
Textbook companies usually practice division of labour to increase efficiency as the most
effective person is allocated to each task. For example, experts specialize in writing the
textbooks; and artists design the cover page of the textbook; whilst workers concentrate
in printing and binding the textbook etc. The labors work at the same stage day-by-day.
With continuous practice, they become more skillful at their work and productivity raises.
Time is also saved as they do not have to move from one production stage to another.
They can concentrate on their own job.
In order to raise efficiency, companies may also provide trainings to labor to improve
their skills, and adopt profit sharing scheme to increase the workers’ working incentive.
Furthermore, companies may also provide a better environment and equipments.
2.2.3
Land
The land used for setting up the factory is geographically immobile, but occupationally
mobile. The land can be used for other production like clothing and electronic products.
2.2.4
Capital
During the production of a textbook, paper, computer, ink, printer, binding machines and
reference books are involved. They are defined as capital as they are man-made resources
which raise the productivity of other factors.
2.3
Business Ownership
Most textbook companies are incorporated as a limited company, like the publisher of the
English textbook, Pearson Education Asia Limited. The company itself has limited
liability. The shareholders of these companies are owners. If the company fails, the loss
to the owner is limited to the amount he/she invested in the company, while the personal
properties of the owners remain unaffected. The risk is limited. The firm has an
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independent existence of its own. It can perform many functions on its own name, e.g.
make contract, take legal actions, and go bankrupt etc. The firm maintains existence
even if the ownership may change.
The procedure of setting up a limited company is complicated, costly and timeconsuming.
Some textbook companies belong to a listed group, for example, Longman belongs to
Pearson plc, a company listed on the London Stock Exchange. It has public ownership.
Compare with a private company, a public company has more shareholders to contribute
capital, thus increasing the fund available for operation and business and the scale of
operations are therefore bigger than private companies. It can enjoy benefits of largescale production. In a listed company, management and ownership are separated. It is
owned by thousands of shareholders. Some of the shareholders do not take part in
management. The board of directors is responsible for managing the company. In this
case, the incentive of the managers is lower if they are not the owners of the firm.
3
The Consumers
The consumers can be the teachers or the students.
3.1
Teacher
Teachers provide tertiary services. From the point of view of teachers, textbooks are one
of their factors of production in the course of rendering their services. Textbook is a
capital good. It helps teachers to teach lessons. Textbooks are occupationally immobile as
they can only be used for education and has no other uses. It is geographically mobile as
they can perform the function of education at different places.
3.2
Students
At the same time, it performs the function of a consumer good and satisfies the want of
the student directly and is produced for direct consumption if the student learns by herself.
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