When a Shift in Demand or Supply Occurs, Economists Can

question 65

Multiple Choice

When a shift in demand or supply occurs, economists can makea quick prediction of the change in price. The denominator ofthe simple price-change formula is the:

• A)multiple of the elasticities of supply and demand.
• B)sum of the elasticities of supply and demand.(True Answer )Correct
• C)difference between the elasticities of supply and demand.
• D)percent change in either demand or supply.

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Definitions:

Risky Asset

An asset that carries a significant degree of risk of losing value, but also offers a potential for higher returns compared to safer investments.

Risk-Free Asset

An asset which is assumed to provide a guaranteed return with negligible risk of financial loss, often considered to be short-term government securities.

Capital Allocation Line

A graph that shows the risk-return trade-off of investable assets, indicating the most efficient portfolio possible given a certain level of risk.

Standard Deviation

Standard deviation quantifies the variation or spread of a set of numbers from its mean, highlighting the volatility or risk associated with a financial instrument or investment.