If a Product's Income Elasticity of Demand Is -1

question 125

Multiple Choice

If a product's income elasticity of demand is -1.7,then we can conclude that

• A)an increase in income will lead to an increase in demand for the product.
• B)the product is certainly a necessity.
• C)the product is a luxury good.
• D)a decrease in income will lead to an increase in demand for the product.
• E)the product is a normal good.

---

Definitions:

Beta

A measure of a stock's volatility in relation to the overall market, indicating its riskiness.

Unsystematic Risk

is the type of risk that is specific to a particular company or industry, and can be mitigated through diversification.

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be eliminated through diversification.

Stock Returns

The earnings generated by investing in stocks, typically expressed as a percentage of the investment's original value.