Exhibit 5-1 Demand Curve

question 59

Multiple Choice

Exhibit 5-1 Demand curve

If demand price elasticity is 2, consumers would:

• A) buy twice as much of the product in response to a 10 percent decrease in prie.
• B) require a 2 percent drop in price to increase their purchases by 1 percent.
• C) buy 2 percent more of the product in response to a 1 percent decrease in price.
• D) buy twice as much of the product in response to a 1 percent decrease in price.

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Definitions:

Cost of Equity Capital

The return a company requires to decide if an investment meets capital return requirements and is typically used in the capital asset pricing model.

Price/Earnings Ratio

A valuation metric for a company that measures its current share price relative to its per-share earnings.

Growth Opportunities

Potential scenarios or plans that a company can undertake to increase its market share, revenues, or profitability.

Implied Share Price

The calculated value of a share based on future earnings expectations or business prospects.