Other Things Being Equal, the Greater the Price Elasticity of Demand

question 10

Multiple Choice

Other things being equal, the greater the price elasticity of demand for a good, the _____.

• A)shorter the period of time consumers have to adjust to price changes
• B)larger the proportion of income spent on the good
• C)fewer the available substitutes of the good
• D)smaller the proportion of income spent on the good
• E)fewer the available complements of the good

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Definitions:

WACC

Weighted Average Cost of Capital - a measure of a firm's cost of capital in which each category of capital is proportionately weighted.

WACC

stands for Weighted Average Cost of Capital, which is a calculation of a firm's capital cost from all sources, including equity and debt, weighted accordingly.

Capital Asset Pricing Model

A model used to determine the theoretical rate of return of an asset, considering risk and the time value of money.

Cost of Equity

The return a firm theoretically pays to its equity investors, i.e., shareholders, to compensate for the risk they undertook by investing their capital.