Holly Took a Prospective Client to Dinner, and After Agreeing

question 85

Multiple Choice

Holly took a prospective client to dinner, and after agreeing to a business deal, they went to the theater. Holly paid $290 for the meal and $250 for the theatre tickets, amounts that were reasonable under the circumstances. What amount of these expenditures can Holly deduct as a business expense?

• A) $540
• B) $270
• C) $145
• D) $125
• E) None - the meals and entertainment are not deductible except during travel.

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Definitions:

Elastic

A term used in economics to describe a situation in which the supply or demand for a good or service is sensitive to changes in price.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase, ceteris paribus.

Price Elasticity

The measure of how much the quantity demanded of a good responds to a change in the price of that good, expressing the sensitivity of demand to price changes.

Price Elasticity

An evaluation of how shifts in a good's price affect the quantity of it demanded.