If Income Decreases,the Budget Line

question 21

Multiple Choice

If income decreases,the budget line

• A)becomes steeper.
• B)becomes flatter.
• C)shifts leftward and parallel to the original budget line.
• D)shifts rightward and parallel to the original budget line.
• E)shifts parallel either leftward or rightward depending on whether the goods measured on the axes are normal or inferior.

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Definitions:

Manufacturing Overhead

Manufacturing overhead includes all the indirect costs associated with producing goods, other than direct materials and direct labor, such as utilities, depreciation, and maintenance expenses.

Direct Materials

Raw materials that are directly consumed in the manufacturing of a product and are easily identifiable in the finished product.

Period Cost

Expenses incurred that are not directly tied to production activities, such as selling, administration, and financial costs.

Direct Labor

The wages paid to workers directly involved in the production of goods or services.