What Is the Effect of a Decrease in the Price

question 10

Multiple Choice

What is the effect of a decrease in the price of potato chips on the market for pretzels,a substitute good,that is initially in equilibrium?

• A)Both equilibrium price and equilibrium quantity of pretzels will increase.
• B)Both equilibrium price and equilibrium quantity of pretzels will fall.
• C)Equilibrium price will increase and equilibrium quantity of pretzels will fall.
• D)Equilibrium price will fall and equilibrium quantity of pretzels will increase.
• E)Equilibrium price and equilibrium quantity of pretzels remain unchanged.

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Definitions:

Expected Growth Rate

The anticipated rate at which a company, investment, or value of an asset is expected to grow over a specified period.

Annual Dividend

The total dividend payment a company distributes to its shareholders in a year, often quoted per share.

Total Return

The overall financial gain or loss on an investment, including both capital appreciation/depreciation and dividends or interest over a given period.

Dividend Yield

A financial ratio that indicates how much a company pays out in dividends each year relative to its stock price.