An Economist Estimates That on Average, for Every 1 Percent

question 136

Multiple Choice

An economist estimates that on average, for every 1 percent increase in income, the quantity of European cars demanded increases by 1.93 percent. From this information one can conclude that European cars are:

• A) a luxury.
• B) a necessity.
• C) an inferior good.
• D) a negative good.

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Definitions:

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance, essential for budgeting and financial planning.

Variable Cost

Costs that vary directly with the level of production or service provision, such as materials and labor.

Break-Even Analysis

A financial calculation to determine the sales volume at which total revenues equal total costs, resulting in no profit or loss.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent or salaries.