Pepsi and Pizza Are Normal Goods

question 284

Multiple Choice

Pepsi and pizza are normal goods. When the price of pizza rises, the substitution effect causes Pepsi to be relatively

• A)more expensive, so the consumer buys more Pepsi.
• B)more expensive, so the consumer buys less Pepsi.
• C)less expensive, so the consumer buys more Pepsi.
• D)less expensive, so the consumer buys less Pepsi.

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Definitions:

Time Spread

A strategy in options trading that involves buying and selling options on the same asset with the same strike price but different expiration dates.

Put

An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Put Contract

A financial contract giving the holder the right, but not the obligation, to sell a specific amount of an underlying asset at a set price within a specific time.

Put Premium

The price that an investor pays for the right, but not the obligation, to sell a security at a specified price before a certain date.