Suppose You Are Shown Two Intersecting Demand Curves That Are

question 97

Multiple Choice

Suppose you are shown two intersecting demand curves that are drawn on the same scale.At the point of intersection,one of the demand curves is steeper than the other.Which of the following could explain the difference in slopes?

• A)The steeper one has a higher income elasticity of demand.
• B)The steeper one is probably the demand curve for a luxury good.
• C)The steeper one applies for the short run whereas the flatter one applies for the long run.
• D)The flatter one is for a good with no close substitutes.
• E)It is not possible to compare the slopes of different demand curves.

---

Definitions:

Cost of Equity

The return that investors expect for providing capital to a company, effectively the compensation for the risk of investing in the company.

Debt-Equity Ratio

An indicator of a business's financial risk, computed by dividing the total amount of its liabilities by the equity owned by shareholders.

Cost of Equity

The return that investors expect for investing in a company's equity, reflecting the risk associated with holding the company's stocks.

Unlever

The process of reducing or eliminating debt from a company's balance sheet, often aiming to improve financial stability.