Exhibit 4-3 Supply and Demand Curves

question 167

Multiple Choice

Exhibit 4-3 Supply and demand curves
-Initially the market shown in Exhibit 4-3 is in equilibrium at P₂, Q₂ (E₂) . Changes in market conditions result in a new equilibrium at P₂, Q₄ (E₄) . This change is stated as a(n) :

• A) increase in supply and an increase in demand.
• B) increase in supply and a decrease in demand.
• C) decrease in demand and a decrease in supply.
• D) increase in demand with supply held constant at S₂.

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Definitions:

Cost Of Capital

The rate of return a company must earn on its investment to maintain its market value and attract funds. It represents the cost of a company to secure funds, whether through debt or equity.

Capital Component

One of three sources of capital: debt, preferred stock, or equity.

Required By Investors

Refers to the expectations or conditions that investors demand before committing capital to an investment.

Capital Structure

The combination of borrowing and ownership investments utilized by a company to finance its activities and expansion.