If Consumers Can Easily Switch to a Close Substitute When

question 49

Multiple Choice

If consumers can easily switch to a close substitute when the price of a good increases, demand for that good is likely to be:

• A)elastic.
• B)inelastic.
• C)unit elastic.
• D)perfectly inelastic.

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Definitions:

Total Capitalization

The sum of a company's long-term debt, equity, and retained earnings, reflecting the total funding sourced from investors and creditors.

Debt-Equity Ratio

A financial ratio used to understand a company's leverage, by dividing its complete liabilities by the equity available to shareholders.

Price-Earnings Ratio

A valuation ratio of a company's current share price compared to its per-share earnings, used to gauge the relative value of a stock.

Earnings Per Share

A profitability measure that indicates the portion of a company's profit allocated to each outstanding share of common stock, calculated as net income minus dividends on preferred stock divided by the average outstanding shares.