Good X and Good Y Are Related Goods

question 139

Multiple Choice

Good X and Good Y are related goods. When the price of Good X rises by 20 percent, the quantity demanded for Good Y falls by 40 percent. What is the cross-price elasticity?

• A) 2
• B) 4
• C) -0.5
• D) -2

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Definitions:

Discounted Payback

A capital budgeting method that calculates the time required to break even on an investment, considering the present value of future cash flows.

Payback

The period of time required to recover the cost of an investment.

Liquidity

The simplicity of transforming an asset or security into immediate cash without impacting its market value.

Internal Rate of Return

The discount rate that makes the net present value (NPV) of all cash flows (both positive and negative) from a particular project or investment equal to zero.