An Important Assumption That Is Made When Constructing a Demand

question 245

Multiple Choice

An important assumption that is made when constructing a demand schedule is that

• A) only price and quantity matter in determining demand.
• B) people always want a certain amount of a product.
• C) demand is too important to be left to the economists.
• D) all other determinants of demand are held constant.
• E) demand has a positive slope.

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Definitions:

P/E Ratio

Price to Earnings Ratio is a valuation metric for stocks, calculating the market value per share divided by the earnings per share (EPS). It indicates the dollar amount an investor can expect to invest in a company in order to receive one dollar of that company’s earnings.

Market-to-Book Ratio

A financial ratio that compares a company's market value to its book value, indicating how much shareholders are paying for the net assets of a company.

Stock Price

The present rate at which a company's stock is traded on the stock market.

Book Value

The net value of a company's assets as recorded on its balance sheet, and calculated by subtracting liabilities from the total value of assets.