If Your Income Goes Up by 2% And,in Response,the Quantity

question 15

Multiple Choice

If your income goes up by 2% and,in response,the quantity demanded of good x rises by 3%,the income elasticity of demand would be:

• A)1.5
• B)6
• C)3
• D)0.20

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Definitions:

Arbitrage Opportunities

Situations where a financial instrument or security can be simultaneously bought and sold in different markets at a price discrepancy to generate risk-free profit.

Portfolio Beta

Portfolio beta measures the sensitivity of a portfolio's returns to movements in the market index. A beta greater than one indicates higher volatility than the market, while a beta less than one indicates lower volatility.

Betas

An indicator of the level of fluctuation or inherent risk in a security or portfolio relative to the broader market.

Factor Portfolio

An investment strategy focusing on specific drivers of returns, such as size, value, and momentum, to achieve targeted outcomes.