Table of Content Section1|2|3|4|5|6|7|8|9 Appendix1|2|3|4|5|6|7 Notes|Executive Summary|Download(PDF format, 798KB) SECTION THREE - SUPPLY AND DEMAND CHARACTERISTICS The markets 3.1        The Councilchose to only examine the supply and demand for primary and secondary textbooksand not tertiary textbooks. The markets for the latter are commonly viewed assubject to fierce competition from imported textbooks, as tertiary level textscan be generally satisfied by using foreign works without adaptation. Moreover,the concern with prices of textbooks over the years has been directed at theprimary and secondary sectors. 3.2        Accordingly, thetwo markets of direct relevance to the study are: the market for supply of primary and secondary school textbooks (the publisher market); and the market for retailing of textbooks (the retail market). Textbook supply and demand 3.3        Based on theCouncil's estimation, annual sales turnover for new textbooks is over $1 billion[6]. Thisestimate does not take into account the sale of second-hand textbooks. 3.4        The demand fortextbooks is different from demand for many other products where end usersexercise choice of products to be consumed. In the purchase of textbooks,individual schools exercise discretion in the choice of textbooks. Once atextbook has been selected by a school it falls into the category of a productfor which no substitute is available, and demand is therefore completelyinelastic. There is also a high reliance in most schools on textbooks inteaching methods, with textbooks being prescribed for all subjects in thecurriculum. 3.5        The latestavailable statistics from ED show that in 2000/01, there were 1,302 schools (816primary schools and 486 secondary schools), with a total enrolment of 950,672students. 3.6       It is clear that because Hong Kong publishers' have little or no opportunity todistribute Hong Kong textbooks outside the SAR, the size of the local studentpopulation against the number of publishers is important to achieve scaleeconomies in textbook production. In a highly congested market, publishers mightface difficulties in securing an economically viable share of the total demandfor textbooks. Some smaller publishers with low production volumes could find itdifficult to recoup their investment. It can be assumed that in thesecircumstances, competition will eventually force those small-volume publishersfrom the market.