Demand for One Item Goes Down When the Price of Another

question 302

Multiple Choice

Demand for one item goes down when the price of another item goes down. These items must be

• A) substitutes.
• B) complements.
• C) normal goods.
• D) inferior goods.

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Definitions:

Implicit Costs

The opportunity costs of using resources that a firm already owns, rather than the expenses directly paid out.

Explicit Costs

Direct, out-of-pocket expenses incurred by a firm or individual for business operations or activities.

Accounting Profits

The financial gain calculated by subtracting total explicit costs from total revenues, using generally accepted accounting principles.

Economic Profits

Profits calculated by subtracting both explicit and implicit costs from total revenues; also known as supernormal profits.