If a Turnip Is an Inferior Good, Then

question 97

Multiple Choice

If a turnip is an inferior good, then

• A)a small decrease in income decreases the quantity of turnips demanded at the current price by a large amount.
• B)a large decrease in income decreases the quantity of turnips demanded at the current price by a small amount.
• C)an increase in income increases the quantity demanded at the current price.
• D)an increase in income decreases the quantity demanded at the current price.
• E)turnips taste awful.

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Definitions:

Out-of-the-money

Describes an option that would not make money if it were exercised immediately because its strike price is not favorable compared to the current market price of the underlying asset.

Intrinsic Value

The perceived or calculated true value of an asset, investment, or company based on fundamental analysis rather than current market price.

Equilibrium

A state in which market supply and demand balance each other, resulting in stable prices and no tendency for change.

Call

An options contract that gives the investor the right, but not the obligation, to buy a stock, bond, commodity, or other instrument at a specified price within a specific time period.