When Income Increases, the Demand Curve for Product X Shifts

question 546

Multiple Choice

When income increases, the demand curve for product X shifts rightward and the demand curve for product Y shifts leftward. These shifts mean that

• A) X and Y both normal goods.
• B) X and Y are complements.
• C) X is a normal good and Y is an inferior good.
• D) X is an inferior good and Y is a normal good.

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Definitions:

Step-Wise Cost

Costs that remain fixed for certain levels of production but can change to a different fixed rate when production levels increase or decrease.

Least-Squares Regression

A statistical method used to determine the line of best fit by minimizing the sum of squares of the differences between observed and predicted values.

Relevant Range

Pertains to the bounds within which assumptions about fixed and variable costs in relation to business activities are considered accurate.

Departmental Overhead Rate

A calculation used to allocate indirect costs to specific departments, helping in the accurate costing of products or services.