Suppose a Consumer Spends His Income on CDs and DVDs

question 445

Multiple Choice

Suppose a consumer spends his income on CDs and DVDs. If his income decreases, the budget constraint for CDs and DVDs will

• A)shift outward, parallel to the original budget constraint.
• B)shift inward, parallel to the original budget constraint.
• C)rotate outward along the CD axis because he can afford more CDs.
• D)rotate outward along the DVD axis because he can afford more DVDs.

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Definitions:

Product Pricing

The process of determining the cost at which a product will be sold, taking into account factors like production costs, market demand, and competition.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.

Direct Materials

Raw materials that can be directly attributed to the production of goods, easily identifiable and quantifiable.

Variable Costs

Costs that change in proportion to the level of production or sales activities of a business.