According to a Study of the U

question 47

Multiple Choice

According to a study of the U.S.demand for alcoholic beverages, the price elasticity of demand for beer is -0.30.Which of the following could explain why the price elasticity of demand for beer is low?

• A)Beer is an inferior alcoholic beverage.
• B)More and more people are switching to wine and cocktails rather than beer.
• C)The price of beer is relatively low and for many people it is a habit forming product.
• D)There are only a few major suppliers of beer.

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Definitions:

Compounded Monthly

Interest on an investment is calculated monthly and added to the principal sum, affecting future interest calculations.

Annual Rate

The interest rate for a period of one year, used to compare the yield of different financial products or investments.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from the central bank's discount window, also a factor in present value calculations.

Perpetuity

A type of annuity that continues indefinitely, often used in financial modeling to represent a constant stream of identical cash flows without an end.