If Two Goods Are Complements

question 314

Multiple Choice

If two goods are complements,

• A) they are consumed independently.
• B) an increase in the price of one will increase the demand for the other.
• C) a decrease in the price of one will increase the demand for the other.
• D) they are necessarily inferior goods.

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, also known as market risk, which cannot be eliminated through diversification.

Capital Allocation Line

A line on a graph that shows the rates of return of portfolios that optimally combine risk and return for an investor.

Risk-averse Investors

Individuals who prefer lower returns with known risks rather than higher returns with unknown risks.

Optimal Risky Portfolio

An investor’s best combination of risky assets; the combination that maximizes the Sharpe ratio.