Of the Following Choices, Which Good Should Have the Most

question 28

Multiple Choice

Of the following choices, which good should have the most inelastic price elasticity of demand?

• A)Gasoline to a car owner.
• B)Cigarettes to a smoker.
• C)Insulin to an insulin-dependent diabetic.
• D)Apples to a vegetarian.

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Definitions:

Optimal Capital Structure

The most favorable mix of debt and equity financing that minimizes a company's overall cost of capital while maximizing its stock price.

Common Share Price

The market value of a single share of a company's common stock.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back at a later date, usually with interest.

Equity

The value of an ownership interest in property, including shareholders' ownership in a corporation.