Under What Circumstances Is the Demand Curve Downward-Sloping

question 39

Multiple Choice

Under what circumstances is the demand curve downward-sloping?

• A)When the good is not a Giffen good.
• B)When the good is a Giffen good.
• C)When the good is an inferior good and the income effect outweighs the substitution effect.
• D)The demand curve is always downward-sloping.

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Definitions:

Required Return

The minimum expected return an investor demands for investing in a particular asset, considering its risk.

Per Share FCFE

The amount of Free Cash Flow to Equity available per share of a company's stock, indicating the dividend-paying ability and financial health of the company.

Required Rate of Return

The smallest percentage of yearly earnings from an investment necessary to attract individuals or businesses to invest in a certain security or project.

FCFF Valuation Model

The FCFF Valuation Model estimates a company's value by using its Free Cash Flow to the Firm (FCFF), discounting the cash flows to their present value using the weighted average cost of capital.