The Fact the Consumers Substitute One Good for Another When

question 61

Multiple Choice

The fact the consumers substitute one good for another when prices change is

• A)a reason why the CPI is used to calculate inflation rates.
• B)not taken into account by the fixed market basket used in calculating the CPI.
• C)a reason why the CPI understates the actual change in the cost of living.
• D)not important to economists.
• E)taken into account by the fixed market basket used in calculating the CPI.

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Definitions:

Machine-Hours

A measure of production time, calculated as the total hours that machines are operating in the manufacturing process.

Job-Order Costing System

An accounting system that accumulates costs for each individual job or project, useful in custom manufacturing environments.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual products or job orders, based on a certain activity base.

Machine-Hours

A measure of production output or activity based on the number of hours machines are operated in the manufacturing process.