Suppose the Price of Compact Disks (CDs) Increases, Other Things

question 27

Multiple Choice

Suppose the price of compact disks (CDs) increases, other things equal. Which of these is most likely to occur in the market for DVDs, a substitute?

• A) a decrease in the demand for DVDs
• B) an increase in the demand for DVDs
• C) an increase in the quantity of DVDs demanded
• D) a decrease in the quantity of DVDs demanded
• E) a decrease in the quantity of DVDs supplied

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Definitions:

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including interest payments and the gain or loss due to the difference between its purchase price and its face value.

Face Value

The nominal or dollar value of a security stated by the issuer, primarily relevant for bonds and the amount repaid at maturity.

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including both interest payments and capital gains.

Real Rate Of Return

The annual percentage profit earned on an investment, adjusted for changes in the price level due to inflation or other external effects.