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Present value of the stock

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1. The demand for salt is relatively price inelastic, while the demand for pretzels is relatively price elastic. How can you best explain why?

2. If a stock is expected to pay an annual dividend of $20 forever, what is the approximate present value of the stock, given that the discount rate is 8%? (SHOW YOUR WORK!) - (HINT: use the annuity equation!!!)

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Demand is that quantity of a good that consumers are not only willing to buy but also have the capacity to buy at the given price.
An important concept in understanding supply and demand theory is elasticity. In this context, it refers to how supply and demand change in response to various stimuli. One way of defining elasticity is the percentage change in one variable divided by the percentage change in another variable (known ...

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