For Markets to Be in Equilibrium, That Is, for There

question 15

Multiple Choice

For markets to be in equilibrium, that is, for there to be no strong pressure for prices to depart from their current levels,

• A) The expected rate of return must be equal to the required rate of return; that is,
• B) The past realised rate of return must be equal to the expected rate of return; that is
• C) The required rate of return must equal the realised rate of return; that is
• D) All three of the above statements must hold for equilibrium to exist; that is,
• E) None of the above statements are correct.

---

Definitions:

Normal Good

A type of good for which demand increases when income increases and falls when income decreases, assuming all other factors remain constant.

Park Visits

The act of visiting a park for recreational, leisure, or sports activities, reflecting an individual's preference or demand for outdoor spaces.

Substitution Effect

The economic principle describing how changes in relative prices can influence the choice between goods or services, holding the overall satisfaction level constant.

Giffen Good

Good whose demand curve slopes upward because the (negative) income effect is larger than the substitution effect.