Suppose You Drink More Tea Because the Price of Coffee

question 162

Multiple Choice

Suppose you drink more tea because the price of coffee has increased.Which of the following best explains your action?

• A)the law of supply
• B)tea and coffee are complements
• C)the substitution effect
• D)the income effect
• E)your nominal income has increased

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Definitions:

Operating Income

The profit realized from a business's operations after subtracting operating expenses like wages, depreciation, and cost of goods sold.

Variable Costing

A costing method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in the cost of goods sold and treats fixed overhead as a period expense.

Activity Base

A measure used to assign costs in activity-based costing, reflecting the volume of activity that drives costs.

Service Firm

A business that provides intangible products or services to consumers or other businesses.