When the Price of Gas Goes Up and the Demand

question 241

Multiple Choice

When the price of gas goes up and the demand for tires goes down, this means tires and gas are:

• A) substitutes.
• B) complements.
• C) both expensive.
• D) both inexpensive.

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Definitions:

Selling and Administrative Expenses

Costs not directly linked to the production process, including sales, marketing, management salaries, and office expenses.

Selling Price

The amount of money charged for a product or service, or the sum the consumer believes it is worth.

Absorption Costing

A pricing methodology that sums up all production-related costs, from raw materials and labor to both flexible and fixed overheads, in calculating the expense of a product.

Cost-plus Pricing

A pricing approach that sets the selling price by adding a predetermined markup to the cost per unit of a product.