Your Entertainment Price Index (EPI) Was Computed Based on Three

question 90

Multiple Choice

Your entertainment price index (EPI) was computed based on three goods: movie tickets,popcorn,and limeade.If you change the quantity of these goods from this year to next year and the prices of two of the three goods increase while the other price falls,then:

• A) your EPI would definitely fall during the year in question if, and only if, you buy less of all the goods in question.
• B) your EPI would definitely rise during the year in question because two of the three goods became more expensive.
• C) your EPI might rise or fall, contingent on both the quantity of the goods that you bought and the prices of these goods.
• D) your EPI might rise or fall, contingent only on the quantity of the goods that you bought and regardless of the prices of these goods.
• E) your EPI might rise or fall, contingent only on the percentage of the market basket that these goods constituted and the percentage that each good occupied within the basket, regardless of the quantity change from year to year.

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Definitions:

Borrowing Rate

The interest rate charged by a lender to a borrower for the use of borrowed money, often expressed as an annual percentage.

ROA

Return on Assets, an indicator of how profitable a company is relative to its total assets, showing how efficient management is at using assets to generate earnings.

ROE

Return on Equity: It's a financial performance indicator that is computed by dividing the net income by the equity held by shareholders.

Equity/Debt Ratio

An economic indicator revealing the balance between shareholder equity and borrowed funds in financing company assets.