Suppose a Local Bookstore Notices That a 2 Percent Increase

question 68

Multiple Choice

Suppose a local bookstore notices that a 2 percent increase in book prices leads to a 2 percent decrease in the number of books sold.Which of the following is true?

• A)Demand for books is price elastic.
• B)The store's sales revenue did not change.
• C)Demand for books is price inelastic.
• D)Demand for books is perfectly inelastic.
• E)The bookstore could increase revenue by further lowering prices.

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Definitions:

Yield To Maturity

The total return anticipated on a bond if the bond is held until its maturity date.

Par Value

The face value of a bond or the stated value of a stock, set at the time of issuance and often used in determining its worth at maturity.

Coupon Rate

The interest rate that an issuer of a bond promises to pay annually or semi-annually to the holder.

Default Risk Premiums

Default risk premiums are additional returns that investors require to compensate for the risk that a borrower might fail to make the required payments on their debt.