Suppose That the Economy Is Growing and That Incomes Increase

question 17

Multiple Choice

Suppose that the economy is growing and that incomes increase by 10%. The demand for hamburger decreases by 5%. What is the income elasticity for hamburger?

• A) 2.0
• B) 2.2
• C) 0.5
• D) -0.5

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Definitions:

Market

A place or system where buyers and sellers interact to trade goods, services, or securities.

Expected Return

This refers to the average amount of profit or loss one can expect from an investment based on its historical performance and probabilities of outcomes.

Beta

A measure of a stock's volatility in relation to the overall market; used in the capital asset pricing model (CAPM) to estimate the return of an asset based on its risk.

Market Risk

The risk of losses in investments caused by factors affecting the overall performance of financial markets.