Question

For a particular good, a 10 percent increase in price causes a 3 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
Answer:

a. The good is a luxury.

b. There are many close substitutes for this good.

c. The market for the good is narrowly defined.

d. The relevant time horizon is short.

Answer 1

Answer:

The correct answer is letter "D": The relevant time horizon is short.

Explanation:

Time horizon is the length of time you can part with your money before you need it again. If you have a long time horizon, there are more opportunities to make a profit out of an investment  but if the time horizon is short there are more possibilities to end up with losses out of an investment. In other words, the longer the time horizon the most likely to profit and the shorter the time horizon the most likely to end with losses.