The Difference Between the Amount a Consumer Is Willing to Pay

question 86

Multiple Choice

The difference between the amount a consumer is willing to pay and the amount they actually must pay for a good is called the:

• A)​price elasticity of demand.
• B)​substitution effect.
• C)​consumer surplus.
• D)​income elasticity of demand.

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Definitions:

Zero-Coupon Bonds

Bonds that do not pay periodic interest payments and are issued at a discount to their face value, maturing to its full face value.

Expected Interest Rate

The interest rate investors anticipate receiving on an investment over a specific period, taking into account the risk of the investment.

Default Risk Premiums

Additional returns that investors demand for taking the risk that the bond issuer might default on its payment obligations.

Treasury Bond

A long-term, fixed-interest U.S. government debt security with a maturity of more than ten years.