What Is Generally True About a 'Big Ticket Item' Such

question 32

Multiple Choice

What is generally true about a 'big ticket item' such as a house or new car?

• A)It will tend to have a more elastic demand than a lower priced good.
• B)It will tend to have an inelastic demand because spending on the item takes up a large share of the average consumer's budget.
• C)It will tend to have an inelastic demand because it has many substitutes.
• D)It will tend to have a more inelastic demand the more time that passes.

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Definitions:

Required Return

The minimum expected return investors demand for investing in a security or project.

Unlevered Return

A return on investment that doesn't account for debt, measuring the performance of an investment as if no borrowing took place.

Cost of Equity

The return a firm theoretically pays to its equity investors to compensate them for the risk they undertake by investing in the company.

Total Debt

The sum of all short-term and long-term liabilities owed by an entity.