Assume That Beer Is a Normal Good

question 68

Multiple Choice

Assume that beer is a normal good. If the price of beer rises, then the substitution effect results in the person buying ________ of the good and the income effect results in the person buying ________ of the good.

• A) more; more
• B) more; less
• C) less; more
• D) less; less

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Definitions:

Security Market Line

A graphical representation used in the Capital Asset Pricing Model (CAPM) that shows the relationship between the expected return of an investment and its risk.

Black, Jensen, and Scholes

Refers to the authors of a landmark study in finance, particularly known for their work related to the capital asset pricing model (CAPM) and option pricing theory.

CAPM

The Capital Asset Pricing Model is a financial model that describes the relationship between systemic risk and expected return for assets, particularly stocks.

Security Market Line

A graphical representation of the Capital Asset Pricing Model, showing the relationship between the expected return of an investment and its risk.