Judy Is a Self-Employed Musician Who Performs for a Variety

question 60

Essay

Judy is a self-employed musician who performs for a variety of events. This year, Judy was fined $330 by the city for violating the city's noise ordinance with a relatively loud performance. As a consequence, Judy contributed $840 to a campaign committee formed to recall the city's mayor. Judy normally hires three part-time employees to help her schedule events and transport equipment. Judy paid a total of $34,600 to her employees through June of this year. In June, Judy fired her part-time employees and hired her husband to replace them. However, Judy paid him $53,400 rather than $34,600. Judy is on the cash method and calendar year, and she wants to know what amount of these expenditures is deductible as business expenses.

---

Definitions:

Inferior Goods

Products whose demand decreases as the income of consumers increases, due to the preference for higher-quality substitutes.

Income Effect

The change in an individual's or economy's income and how that change will impact the quantity demanded of a good or service.

Optimal Choice

The best possible decision or selection, based on a specific set of criteria, that maximizes efficiency, benefit, or utility.

Marginal Rate

The amount of change in one variable due to a unit change in another, commonly used in contexts like taxation or economic production.