The Price Elasticity of Demand for a Given Good Is

question 151

Multiple Choice

The price elasticity of demand for a given good is 2.3. This implies that if price

• A)rises by 10 percent, quantity demanded falls 2.3 percent.
• B)rises by 2.3 percent, quantity demanded falls 2.3 percent.
• C)rises by 20 percent, quantity demanded falls 46 percent.
• D)falls by 10 percent, quantity demanded falls 2.3 percent.
• E)none of the above

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Definitions:

Inflation Premium (IP)

The additional amount that investors require on the return of an investment to compensate for the loss of purchasing power due to inflation.

Maturity Risk Premium (MRP)

The Maturity Risk Premium is the additional return investors demand for holding longer-term securities due to increased risk of price fluctuations and uncertainty over a long period.

Treasury Bonds

These are long-term, fixed-interest government debt securities with a maturity of more than ten years. They are considered safe investments because they are backed by the U.S. government.

Capital Gain/Loss

The increase or decrease in the value of an investment or real estate, calculated by the difference between the purchase price and the sale price.