Use the Figure to Calculate the Income Elasticity of Demand

question 33

Multiple Choice

Use the figure to calculate the income elasticity of demand when income increases from $25,000 to $30,000:

• A) -1.0
• B) -0.1818
• C) 0.1818
• D) -1.5
• E) 1.2

Identify and calculate different types of variances (spending, activity, revenue) and their implications for business decision-making.

Analyze flexible budgets and understand how changes in activity levels affect budgeted income.

Detail the process of creating planning and flexible budgets and the importance of accuracy in budgeted figures.

Interpret the impact of actual activity levels on budgeted outcomes, including direct materials, direct labor, and overhead expenses.

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Definitions:

Arranged Hierarchy

A system where people or groups are ranked one above the other according to status or authority.

Maslow's Hierarchy

A theory in psychology proposed by Abraham Maslow, which suggests that humans are motivated by a hierarchy of needs, starting from basic physiological needs to self-actualization.

Alderfer's ERG Theory

A motivational theory proposed by Clayton Alderfer that categorizes human needs into three groups: Existence, Relatedness, and Growth.

McClelland's Acquired Needs Theory

A motivational theory that emphasizes the importance of three needs - achievement, affiliation, and power - in determining worker motivation.