Resource X Has Many Close Substitutes, Whereas Resource Y Has

question 147

Multiple Choice

Resource X has many close substitutes, whereas resource Y has no close substitutes. Other things equal, we would expect

• A) the demand for resource Y to be more elastic than the demand for resource X.
• B) resources X and Y to be close substitutes.
• C) resource X to be more expensive than resource Y.
• D) the demand for resource X to be more elastic than the demand for resource Y.

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Definitions:

Underlying Asset

The financial instrument (e.g., stock, bond, commodity) upon which a derivative's price is based.

American Put Option

A financial derivative that gives the holder the right to sell an asset at a specified price within a specified time.

Volatility

In financial contexts, volatility refers to the degree of variation of a trading price series over time, which is usually measured by the standard deviation of log returns.

Call Increases

Typically refers to an increase in the price of call options, which are contracts that give the holder the right to buy the underlying asset at a specified price.