If Both the Demand for and the Supply of Computers

question 19

Multiple Choice

If both the demand for and the supply of computers are increasing, which of the following statements is true?

• A) The consumer should buy a computer now since the price will be higher in the future.
• B) The consumer should wait and buy a computer later since the price will be lower in the future.
• C) The price of a computer will be the same in the future as it is now.
• D) It is impossible to know, given only this information, whether the prices of computers will go up or down in the future.

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Definitions:

Margin of Safety

The difference between actual or expected sales and the break-even point, indicating the amount of sales that can decline before a firm incurs a loss.

Contribution Margin Ratio

A financial metric that represents the contribution margin as a percentage of total sales, assessing the profitability and efficiency of production.

Operating Income

Income generated from normal business operations, excluding expenses such as taxes and interest payments.

Margin of Safety Percentage

A financial metric indicating the difference between actual sales and break-even sales, expressed as a percentage of actual sales.