If Pizza and Beer Are Complementary Goods, We Can Conclude

question 38

Multiple Choice

If pizza and beer are complementary goods, we can conclude that

• A) the income elasticity of demand is negative.
• B) their cross- elasticity of demand is negative.
• C) the income elasticity of demand is positive.
• D) both goods are inferior goods.
• E) their cross- elasticity of demand is positive.

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been subtracted from its total revenue.

Straight-Line Depreciation

A method of allocating the cost of a fixed asset evenly across its useful life.

Internal Rate of Return

A financial metric used to estimate the profitability of potential investments, calculated as the rate of return that makes the net present value of all cash flows from a particular project equal to zero.

Present Value

A calculation that determines the current value of a future amount of money or stream of cash flows given a specified rate of return.