A New Car Is Typically Considered to Be a Normal

question 135

Multiple Choice

A new car is typically considered to be a normal good.What would happen to the equilibrium price and quantity of new cars if there is a recession where many people lose their jobs?

• A) The equilibrium price would rise and the equilibrium price would fall as demand shifts to the left.
• B) The equilibrium price and quantity would both fall as demand shifts to the left.
• C) The equilibrium price and quantity would both rise as demand shifts to the right.
• D) The equilibrium price would fall and the equilibrium quantity would rise as demand shifts to the right.
• E) There would be no change to the equilibrium price or quantity.

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Definitions:

Volume

The quantity of an asset or security that is traded within a specified time period.

Capital Structure

The particular combination of debt and equity used by a company to finance its overall operations and growth.

Cost Structure

The mix of fixed and variable cost used by a firm.

Financial Leverage

Utilizing borrowed funds to amplify the prospective gains of an investment.