The Demand Curves for Gold in New York and Zurich

question 170

Multiple Choice

The demand curves for gold in New York and Zurich can both be represented by a line with negative slope, -b. When the price is zero the demand for gold is x ounces higher in New York than in Zurich. At the current price of gold the price elasticity of demand for gold in New York and Zurich is -3 and -4 respectively. The value of x equals

• A) a quarter of the current demand for gold in New York
• B) a third of the current demand for gold in New York
• C) a half of the current demand for gold in New York
• D) three-quarters of the current demand for gold in New York
• E) none of the above

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Definitions:

Annual Interest

The total amount of interest payable on a loan, bond, or other financial instrument over the course of a year.

Market Rate

The current interest rate offered in the market for instruments with similar risk and maturity levels.

Present Value Factor

A financial calculation used to determine the present value of a sum of money to be received in the future by accounting for time value of money.

Issue Price

The price at which new shares are offered to the public by a corporation during an issuance.