Two Goods Are Considered Substitutes If

question 129

Multiple Choice

Two goods are considered substitutes if

• A) a decrease in the demand for one leads to a decrease in the supply of the other.
• B) an increase in the demand for one leads to a decrease in the supply of the other.
• C) an increase in the price of one leads to an increase in the demand for the other.
• D) a decrease in the price of one leads to an increase in the demand for the other.
• E) a decrease in the supply of one leads producers to switch to production of the other.

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Definitions:

Risk-Free Rate

The theoretical rate of return of an investment with zero risk of financial loss, often represented by the yield of government bonds from stable governments.

Market Risk Premium

This is the extra return expected by investors for holding a risky market portfolio instead of risk-free assets.

Security Market Line

A line that represents the risk versus expected return of the market; used to assess the performance of investments compared to the market.

Systematic Risk

The inherent risk associated with the overall market or economy that cannot be eliminated through diversification.