If a 20 Per Cent Increase in the Price of a Used

question 103

Multiple Choice

If a 20 per cent increase in the price of a used car results in a 10 per cent decrease in the quantity of used cars demanded, then the demand for used cars is

• A) inelastic.
• B) unit elastic.
• C) perfectly elastic.
• D) elastic.

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Definitions:

Underlying Asset

The security or asset on which a derivative contract is based, influencing its value and characteristics.

Exercise Price

The predetermined price at which an option's underlying asset can be bought or sold.

Put Option

A put option is a financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Exercise Price

The predetermined price at which the holder of an option can buy (in case of a call option) or sell (in case of a put option) the underlying asset.