The Limitation That a Consumer's Total Expenditure on Goods and Services

question 14

Multiple Choice

The limitation that a consumer's total expenditure on goods and services purchased cannot exceed the income available is referred to as

• A)maximizing behavior.
• B)economizing behavior.
• C)the price constraint.
• D)the budget constraint.

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Definitions:

Fama-French Three Factor Model

The Fama-French Three Factor Model expands on the Capital Asset Pricing Model by incorporating three factors: market risk, size risk, and value risk, to explain stock returns.

Risk Premiums

The extra return expected by investors for holding a risky asset compared to a risk-free asset, as compensation for the additional risk.

Expected Return

The anticipated profit or loss from an investment, taking into account the potential outcomes and their probabilities.

SMB Beta

A measure used in the evaluation of stocks, indicating a stock's sensitivity to movements in the small minus big (SMB) factor, part of the Fama-French three-factor model.