When the Price of a Pizza Decreases from $14 to $12

question 93

Multiple Choice

When the price of a pizza decreases from $14 to $12,

• A) the income effect means that the demand for pizza will not change.
• B) the income effect points out that the total purchasing power of people who buy pizza increases.
• C) the income effect means people buy less pizza.
• D) None of the above answers is correct.

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Definitions:

Unearned Revenues

Income received by a company for goods or services yet to be delivered or performed.

Liability Uncertainty

Liability uncertainty involves not knowing the exact amount or timing of future outflows due to existing obligations.

Sales Taxes Payable

Current liabilities on a company’s balance sheet, representing taxes collected from customers on behalf of governmental authorities which are yet to be remitted.

Credited

An accounting entry that increases a liability or equity account, or decreases an asset or expense account.