Two Goods Are Considered Substitutes Only If

question 102

Multiple Choice

Two goods are considered substitutes only if

• A) a decrease in the demand for one leads to a decrease in the supply of the other
• B) an increase in the demand for one leads to a decrease in the supply of the other
• C) an increase in the price of one leads to an increase in the demand for the other
• D) a decrease in the price of one leads to an increase in the demand for the other
• E) a decrease in the supply of one leads producers to switch to production of the other

---

Definitions:

Annuity Due

A financial product that pays out a series of payments at the beginning of each period, such as monthly or annually.

Present Value

The current value of a future sum of money or stream of cash flows given a specified rate of return, commonly used to appraise long-term projects.

Discount Rate

The interest rate used to determine the present value of future cash flows in discounted cash flow analysis. It reflects the opportunity cost of capital.

Present Value

The value at present of future cash receipts or a lump sum, taking into consideration a specified rate of return.