If a Decrease in the Price of Gasoline Increases the Demand

question 125

Multiple Choice

If a decrease in the price of gasoline increases the demand for large cars, then

• A) gasoline and large cars are complements in consumption.
• B) large cars are an inferior good.
• C) gasoline is an inferior good.
• D) gasoline and large cars are substitutes in consumption.

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Definitions:

Adjusting Entry

An accounting record made to adjust revenues and expenses to match the accounting period they were incurred, ensuring compliance with the accrual basis of accounting.

Allowance Method

An accounting technique used to estimate uncollectible accounts receivable, acknowledging potential losses on credit sales.

Carrying Amount

The book value of assets and liabilities as reported on the balance sheet, after deducting any accumulated depreciation or amortization.

Accounts Receivable

Receivables from clients for goods delivered or services performed by a company, awaiting payment.