When a 2 Percent Increase in Price Generates a Greater

question 70

Multiple Choice

When a 2 percent increase in price generates a greater than 2 percent decrease in quantity demanded, then:

• A) demand is price inelastic.
• B) total revenue increases.
• C) demand is positively sloped.
• D) demand is unit elastic.
• E) total revenue

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Definitions:

Zero Coupon

A bond or debt security that does not pay interest (a coupon) but is traded at a deep discount, providing profit at maturity when the bond is redeemed for its full face value.

Yield

The income return on an investment, such as the interest or dividends received, expressed as an annual percentage of the investment cost.

Original Maturity

The fixed term length at the issuance of a bond or other fixed-income security until it reaches its due date for the repayment of the principal.

Current Yield

Current yield is the annual income (interest or dividends) divided by the current price of the security.