If the Cross Elasticity of Demand Between Coffee and Tea

question 13

Multiple Choice

If the cross elasticity of demand between coffee and tea is positive, an increase in the price of tea will shift the demand curve for

• A) tea rightward.
• B) tea leftward.
• C) coffee rightward.
• D) coffee leftward.

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Definitions:

Intrinsic Value

The inherent, actual value of an asset, independent of its market value.

Underwater

A situation where the market value of an asset is less than the amount owed on it, often used in reference to mortgages.

Expiration Date

The last day on which an option or futures contract is valid or can be exercised.

Option

A financial derivative that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at an agreed-upon price within a specific timeframe.