Suppose That the Price of Good X Increases from $3

question 38

Multiple Choice

Suppose that the price of good X increases from $3.00 to $4.00 while the price of good Y increases from $150 to $200.The relative price of X (in terms of Y)

• A)remained constant.
• B)has risen.
• C)cannot be determined from the above data.
• D)has fallen.
• E)is completely unrelated to the price of good Y.

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Definitions:

Hedging

A strategy used in finance to reduce the risk of adverse price movements in an asset, typically by taking an offsetting position in a related security.

Stock Price Declines

A situation where the market value of a company's shares decreases over a period of time.

Short Calls

An options trading strategy where an investor sells call options on an underlying asset they do not own.

Option Clearing Corporation

The organization responsible for ensuring the proper settlement of options contracts and mitigating counterparty risk in the options market.