If the Price of a Good Increases by 10 Percent,its

question 65

Multiple Choice

If the price of a good increases by 10 percent,its quantity demanded drops by 50 percent.The price elasticity of demand is:

• A) 1.0
• B) 0.2
• C) 5.0
• D) 2.0

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Definitions:

Call Option

A financial contract giving the buyer the right, but not the obligation, to buy an asset at a specified price within a specific time period.

Exercise Price

The price at which the holder of an option can buy (call) or sell (put) the underlying security.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, often represented by the yield on government securities such as U.S. Treasury bills.